Robo advisors are financial adviser class that offers portfolio management or financial advice online with least intervention of human. They offers digital financial advice depending on mathematical algorithms or rules. The algorithms are executed by software and hence financial advice essentially do not require any human advisors. Moreover, the software uses the algorithms to automatically manage, allocate and optimize client’s assets. In 2008, the robo advisors emerged with higher acceleration in U.S. and later in 2011 in other countries.
The global robo advisors market is primarily driven by the low fee robo advisory in the market during the forecast period. The robo advisory industries is likely to witness expansion continuously as the robo advisors attend to broader range of customers. With the increase in number of robo advisors, it is expected to see robo advisory requiring very less account minimums to take the benefits of their services. As of now, the minimum investment amount for robo advisors starts at a minimum of USD 500. Robo advisors are reducing the distance between client and wealth management products. They are removing the middle men and fee collectors out of the value chain thereby creating a simple fee structure that is directly related to the cost of the robots and products. Another major drivers in the global robo advisors market is the increasing integration of artificial intelligence.
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With the integration of artificial intelligence in the robo advisory system it is likely to help the robots to act more like human. For instance, Wealthfront has integrated artificial intelligence capabilities into its services. This is likely to track account activity on its products so as to understand and analyze the way the account holders are taking their financial decisions, spending and investing in an effort to provide more custom-made advices to the customers. With the entry of banks in the robo advisor market, the market is witnessing major driving factors in the global market of robo advisors market during the forecast period. Banks are now partnering with various robo advisor companies to provide various services directly to it customers. Banks like UBS, Schwab and Bank of Montreal has already launched their own robo advisor services.
The robo advisors market is facing challenges despite of various driving factors. One of the major factors restraining the market growth is due to the lack of direct communication with the client. The risk profile is continuously changing and is different due to various factors like retirement, income and job. These robo advisors lack the capability of direct communication with the clients and familiarize to the changing situations. Since the robo advisor system are based on single moment in time that is likely to be greatly influenced by the short term emotions or events. Moreover, the algorithms that are considered are based on previous market assumptions and data that is not likely to be correct in the future because of the changing financial market and products.
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Continuous advancement in technology is one of the major opportunities in the global robo advisors market. Increasing advancement is likely to attract further attention since it is approaching the top of the hype cycle that shows in a phase of high public awareness and exaggerated interests.
The robo advisors market based on automation is bifurcated into semi-automated and fully automated. Based on the services, the market has been bifurcated into retirement planning, tax loss harvesting and investment advisors, B2B robo advisors, wealth management, personal financial advisors and others. The regional split of the market encompasses North America, Europe, Asia Pacific, Middle East and Africa and Latin America.
Some of the top players in the global robo advisors market encompasses Bambu (Singapore), Betterment Holdings Inc. (U.S.), Hedgeable, Inc. (U.S.), WiseBanyan, Inc.(U.S.), Wealthfront Inc.(U.S.), Ally Financial Inc. (U.S.), SigFig Wealth Management (U.S.), Charles Schwab & Co.(U.S.)., AssetBuilder Inc.(U.S.) and blooom, Inc. (U.S.) among others.
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