How big is the robo-advisory market in 2023?
02, 2024 (GLOBE NEWSWIRE) — As per The Business Research Company's Robo Advisory Global Market Report 2024, the global robo advisory market has witnessed extraordinary growth, surging from $41.63 billion in 2023 to an estimated $61.99 billion in 2024 at a remarkable Compound Annual Growth Rate (CAGR) of 48.9%.
The global robo advisory market size was estimated at USD 6.61 billion in 2023 and is projected to grow at a compound annual growth rate (CAGR) of 30.5% from 2024 to 2030. Robo advisory platforms provide automated wealth management services accessible via online or mobile platforms.
The market is expected to continue growing at an annual growth rate of 8.06% from 2024 to 2027, resulting in a projected total amount of US$2,274.00bn by the end of 2027.
Robo Advisory Market Size Envisioned at USD 98.09 Billion by 2030, Increasing a CAGR of 32.64% | Rising Demand for Customised Investment Options. Robo advisory market size is anticipated to grow from USD 5.82 Billion to USD 98.09 Billion in 10 years.
Robo Advisory Market Research, 2032
The global robo advisory market was valued at $7.9 billion in 2022, and is projected to reach $129.5 billion by 2032, growing at a CAGR of 32.5% from 2023 to 2032. Robo advisory refers to the provision of automated, algorithm-driven financial advice and investment services.
According to Spectrem, on a scale of 1 to 100 (1 being low and 100 being high), wealthy investors rated their knowledge of robo advisers at 15.47, and only 6% said they have ever used one.
This will vary significantly depending on the risk profile of the portfolio, broader market conditions, and the specific robo-advisor used. Some robo-advisor portfolios may outperform the S&P 500 in certain years or under specific conditions, while in others, they underperform.
Limited Flexibility. If you want to sell call options on an existing portfolio or buy individual stocks, most robo-advisors won't be able to help you. There are sound investment strategies that go beyond an investing algorithm.
Limited human interaction: Robo-advisors do not offer the same level of human interaction as traditional financial advisors. This can be a disadvantage for investors with more complex financial needs or investment goals.
Last year, roughly 30 million Americans used robo-advisors to grow their assets. Statista expects another 20 million people in the US to start using their services in the next four years, pushing the total user count to nearly 50 million.
What is the average robo-advisor fee?
The robo-advisor will invest your money in various funds that also charge fees based on your assets. The fees can vary widely, but across a portfolio they typically range from 0.05 percent to 0.25 percent, costing $5 to $25 annually for every $10,000 invested, though some funds may cost more.
As with many other financial advisors, fees are paid as a percentage of your assets under the robo-advisor's care. For an account balance of $10,000, you might pay as little as $25 a year. The fee typically is swept from your account, prorated and charged monthly or quarterly.
Markets can be unpredictable, and no form of investing is immune to potential losses. Robo-advisors, like human advisors, cannot guarantee profits or protect entirely against losses, especially during market downturns—even with well-diversified portfolios.
By providing efficient, low-cost, and accessible investing solutions, these automated investment platforms powered by algorithms and artificial intelligence (AI) have challenged the traditional wealth management environment. In 2023, robo-advisors are already expanding and transforming.
The latest MagnifyMoney study of nearly 1,600 Americans finds that 63% of consumers are open to using a robo-advisor to manage their investments, with millennials being the most open (75%). That said, only 41% of Americans with investments use a financial advisor — and just 1% say they use a robo-advisor.
The generic cons of Robo Advisors are that they don't offer many options for investor flexibility. They tend to not follow traditional advisory services, since there is a lack of human interaction.
Robo-advisors lack the ability to do complex financial planning that brings together your estate, tax, and retirement goals. They also cannot take into account your insurance, general budgeting, and savings needs.
Learn more about how we review products and read our advertiser disclosure for how we make money. According to our research, Wealthfront is the best overall robo-advisor due to its vast customization options, fee-free stock investing, low-interest rate borrowing, dynamic tax-loss harvesting, and other key features.
Even better: most Robo-advisors are cheaper than traditional investment advisors, making them a great choice for those nearing (or already in) retirement and looking to minimize investment fees. Some Robo-advisors like SigFig will manage your investments in your existing accounts.
Robo-advisors help automate the decision-making, recommending a portfolio that aligns with an investor's goals and preferences. Robo-advisors may carry higher fees than ETFs, but their costs usually remain below those of a traditional human advisor.
What if wealthfront goes out of business?
Because Wealthfront Brokerage is a member of the Securities Investor Protection Corporation (“SIPC”), our customers are protected up to applicable SIPC limits if Wealthfront Brokerage were to go out of business and there were customer securities or funds unaccounted for.
Suppose you're starting from scratch and have no savings. You'd need to invest around $13,000 per month to save a million dollars in five years, assuming a 7% annual rate of return and 3% inflation rate. For a rate of return of 5%, you'd need to save around $14,700 per month.
Since then, Wealthfront has become profitable, CEO David Fortunato told Reuters in an interview, and is focused on running the business "for the long term" for more than 700,000 customers. The main goal is organic growth and Wealthfront is not currently considering acquisitions, or an initial public offering.
Robo-advisors make money through annual fees, primarily management fees called a wrap fee. The wrap fee covers a percentage of the assets under management (AUM). Compared to a traditional financial advisor, robo-advisors charge lower advisory fees, typically around 0.25%.
If you require a high level of personalized service and direct management of your investments, a traditional human advisor might be better suited to your needs. Conversely, if cost and simplicity are your primary concerns, a robo-advisor might be the better choice.
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