Fully-automated robo-advisors to reach $987bn by 2022

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Consumer trust will play a fundamental role in shaping the robo-advisors market, says Juniper.
Consumer trust will play a fundamental role in shaping the robo-advisors market, says Juniper.

Robo-advisors (digital wealth management platforms) under full control of artificial intelligent (AI) systems will reach $987 billion per annum in assets under management (AUM) by 2022.

This is according to Juniper Research titled: AI in Fintech: Roboadvisors, Lending, Insurtech & Regtech 2018-2022, which notes consumer trust would play a fundamental role in shaping the market during the projection period.

For this reason, Juniper predicts that 'hybrid' robo-advisors will dominate the market, managing 66% of global robo-advisory AUM in 2022. It notes that human advisor input plays a key role here, serving to allay consumers' fears of handing management of their cash over to an algorithm.

However, the research predicts that while key market forces, such as economic uncertainty and increasing awareness of services would drive the overall market, changing demographics would kick-start demand for fully-automated robo-advisors.

"Digital-savvy millennials are rapidly reaching the age where the idea of financial planning is an important consideration," notes research author Steffen Sorrell. This demographic's greater inherent trust in algorithms, alongside demand for 'fire-and-forget' convenience will drive take-up for AI fully-managed services."

These fully-automated robo-advisors will represent approximately 25% of total robo-advisor AUM in 2022, and their growth will considerably outpace semi-automated, supervised deployment types with lesser reliance on AI, says the study.

Meanwhile, the research predicts that market consolidation was highly likely in the near-term, particularly in more mature robo-advisory markets, such as the US.

It says strong competition and high customer acquisition costs meant that many services would be unable to reach the AUM 'tipping point' necessary to generate profits.

Juniper notes this would impact semi-automated robo-advisory services the most, owing to their reliance on human advisors and relatively low AUMs. For these reasons, many service providers would make themselves a target for acquisition, it notes

Deloitte says analysts estimate that by 2020, robo-advisory market between $2.2 trillion and $3.7 trillion in assets will be managed with the support of robo-advisory services.

By the year 2025, this figure is expected to rise to over $16.0 trillion AUM, roughly three times the amount of assets managed by BlackRock, the world's biggest asset manager to date.

Meanwhile, TrendForce says the global market for robo-advisors used in investment consultation will reach about US$5.9 trillion in scale by 2020.

It expects expansionary momentum to be strongest in China, where the growing Internet banking and financial services industry is driving the demand for this type of technology.

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