Assets Managed by Robos Expected to Balloon to $1.26 Trillion by 2023
Robo-advisors have grown substantially in popularity as well as assets under management over less than a decade, but that pace is expected to accelerate over the next four years.
At the end of 2018, direct-to-consumer robo-advisors had $257 billion on their platforms, Barron’s writes. In 2023, however, they’re expected to have $1.26 trillion, according to consulting firm Aite Group — which represents a 37% five-year compound annual growth rate, according to the publication. Aite’s conservative estimate, which assumes the same 15% growth rate robos experienced last year, would still lead to $524 billion on their platforms by 2023, Barron’s writes.
And it’s not the robo-advice startups that are leading the industry’s growth, Barron’s writes, citing Alois Pirker, research director at Aite Group. Currently, robo-advice pioneers Betterment and Wealthfront have about the same market share as Morgan Stanley and UBS Wealth Management, behind discount brokerages Fidelity Investments and Charles Schwab, which in turn lag product manufacturer Vanguard, according to the publication.
“While startups have been in the limelight, much of this industry’s growth potential hinges on incumbent wealth management firms’ ability and willingness to cross-sell digital advice into an already established client base and to leverage their brand and distribution channels to gain net new digital assets,” Pirker says, according to Barron’s.
By 2023, product manufacturers such as Vanguard will likely fall behind discount and online brokers, who stand to win from their established base of self-directed investors, according to Aite, the publication writes. Full-service firms and startups, meanwhile, will share the third spot market share-wise, Aite says, according to Barron’s.
At the same time, however, it’s the full-service firms that will experience the fastest pace of growth, according to Aite, the publication writes. That expansion will be primarily due to smaller traditional accounts transitioning to digital platforms, Aite says, according to Barron’s.