Investment Market News

Robo Advisors’ AUM Expected to Hit Nearly $145 Billion in 2017

Assets estimated to surpass $450 billion by 2021, according to S&P Market Intelligence.

The trend toward robo advisors isn’t going away anytime soon. Technology investments and     new platform launches from a growing number of large brokers and wealth managers could result in a fourfold increase in assets managed by these platforms by the end of 2021.

That’s one of the findings of a recently released report from S&P Market Intelligence, a division of S&P Global. The firm expects assets under management to grow by 46% from a base of $98.52 billion in 2016 to $143.94 billion in 2017. By 2021, S&P Market Intelligence expects assets will surpass the $450 billion mark and end that year at $460.46 billion.

Digital advisors, also known as robo advisors, provide a variety of advisory services to clients via internet-based platforms that use algorithmic portfolio management strategies. Digital advice may be delivered in a fully-automated format or may supplement traditional advisory models, according to this September 2016 whitepaper by BlackRock. The advice and service isn’t all the same, with varying degrees of investment philosophies and sophistication offered, as well as some degree of interaction with human advisors also available.

As the figures and estimates by S&P show, the growth in assets garnered by digital or robo advisory platforms has skyrocketed as both advisors and investors embrace these platforms. It’s no big secret that the likes of Vanguard Group, Charles Schwab, TD Ameritrade, E*Trade and Fidelity, which all got into the act in 2015 and 2016, have driven much of the growth.



More Asset Managers to Launch Digital Platforms Amid Growing Investor Interest

More are on the way, S&P notes. Wells Fargo, Morgan Stanley and JPMorgan Chase, among others, also have confirmed planned launches of digital investment services since the start of 2017. Competition may also likely come from global banking firms exporting platforms outside of their home markets to the U.S.

Larger asset managers have also turned to acquisitions. BlackRock bought FutureAdvisor in 2015, an advisor registered with the Securities and Exchange Commission, while Invesco Ltd. in 2016 acquired Jemstep – an advisor-focused digital platform.

On the investor side, technology innovations and convenience are leading to investors’ acceptance of making decisions and receiving guidance online. Two in five respondents said they use an online or mobile portal to manage their investments, and one in eight (about 13%) are using a robo advisor or would consider using one in the next year, according to the Spring 2017 Merrill Edge Report. Among demographic groups, the survey of 1,023 mass affluent respondents found that 22% of millennials are, or would consider, using a robo advisor.

The demographic trends, though, appear to be broader, based on at least one of the bigger online startups. Betterment LLC, which in July became the first independent online advisor in the U.S. to hit $10 billion in assets under management, said recently that its customers’ average age is 36. That figure is just outside the typical millennial range defined as aged 18 to 34. What’s more, a Betterment spokesperson said in this profile that 30% of the firm’s assets come from the 50-plus demographic segment.


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