Investors see much value in robo-advisors

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The robo-advisor market has ballooned in the last 12 months and the trend is set to continue in the next two years, as investors are increasingly using digital platforms for automated, algorithm-driven investment services.

Trading platform Block Arabia says the total value of assets under the management of robo-advisors is set to double and hit over $2 trillion value by 2023.

Robo-advisors are online platforms that use complex algorithms to create investment portfolios based on the client’s information when signing up for an account.

Due to their low fees, ease-of-use and small opening balance, they are regarded as an excellent choice for entry-level investors.

According to Block Arabia, the entire industry is growing by a massive annual growth rate of 30%, despite the market volatility caused by COVID-19.

Locally, the use of robo-advisers is steadily picking up, evidenced by the launch of SA-based robo-advisor platforms such as Sygnia.

At its launch, Sygnia was touted as a true game-changer for South African investors, allowing a minimum investment of R500 a month.

The internet-based financial advisory system evaluates the current position and recommends an appropriate mix of investments suited to unique personal circumstances.

Globally, Block Arabia says, after COVID-19 struck, the sign-ups for robo-advisory services surged like never before, as more than 140 million people started using robo-advisors since the outbreak of the pandemic, with China as the largest market.

The trading platform notes there is wide range of reasons investors opt for robo-advisors.

“The most significant benefit of robo-advisors is that they make decisions based on real-time statistics, eliminating poor decision-making or spontaneous buy or sell decisions. Also, their low-cost fees, usually from 0.25% per year, are much cheaper than the conventional stockbrokers and other alternatives.

“Automated accounts are generally cheaper because they use computer algorithms instead of human money managers. That is why they have been especially attractive to younger, tech-savvy investors looking to grow their savings before retirement.

“Between 2017 and 2019, the number of people with assets managed by robo-advisors tripled and hit over 150 million globally. However, another 140 million people started using robo-advisors after the pandemic struck, with the total number of users rising to 292.8 million.”

Additionally, according to data by Statista, the number of investors using robo-advisor financial planning services is expected increase to 393.7 million by 2023, nearly three times more than pre-pandemic figures.

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