You may have heard of robo-advisors, the nickname for online investment platforms that use algorithms to manage clients’ money.
Robo-advisors suffer from what we could call Bitcoin syndrome: It sounds cool, but who actually uses it?
According to a new report from Swiss research company MyPrivateBanking Research, a lot of people do — and more of us will get on board in the near future. By the end of 2014, the report finds, robo-advisors may be managing $US14 billion, 83% of that in the US. In the next five years, that number is expected to skyrocket to about $US255 billion worldwide.
This sounds like a lot of money, and it is, but it’s worth noting that it’s only a small fraction of the assets managed by traditional (read: human) financial advisors. Traditional advisors still control around $US5 trillion in the US alone.
“Robo-advisors will win only a small market share of this total market in the near and medium term. However, the robo phenomenon is here to stay, and we believe that there is good reason to expect robo-advisors to be highly successful as a class,” says MyPrivateBanking Research senior analyst Francis Groves in a press release.
In particular, the report highlights Wealthfront, Personal Capital, and Betterment as robo-advisors with the most potential to disrupt the industry, specifically due to “their ability to win new clients, their marketing prowess, and their deep pockets funding-wise.”