Robots have made $14 billion in two years on Wall Street - and they're just warming up

T 800 Robot Terminator Genisys Melinda Sue GordonMelinda Sue Gordon/Paramount/‘Let me tell you about my long-short strategy.’

Robo-advising is gaining traction with younger investors and will become a trillion dollar industry one day — and even Wall Street banks are willing to admit it.

This comes from a Citigroup report September 3 titled “Rise of the Machines: Retail Revolution.”

In just two years, the report notes, robo-advisers have boosted their assets from virtually nothing in 2012 to $US14 billion by the end of 2014. And they’re just getting warmed up.

Over the next 10 years, their assets under management could expand exponentially, to $US5 trillion, the report speculates.

Already big corporate players like Charles Schwab and BlackRock have taken notice. Schwab launched online wealth management tools of its own earlier this year and BlackRock decided to buy instead of build, buying FutureAdvisor last month.

LPL Financial Holdings and RCS Capital Corp. in the US are facing the greatest risks, according to Citi, along with Hargreaves Lansdowne and St. James Place in Europe.

The note said: “We expect downward pressure on advisory fees throughout the industry as the prevalence of Robos picks up — likely causing a perceived/real impact on LPLA’s and RCAP’s revenues and margins.”

Big banks that also provide wealth advisory services have to be watching the progress of their stealthy, smaller competitors, especially if they want to hold onto their trillion-dollar lines of business as the industry increasingly shifts digital.

Fortunately, Citi also has encouraging words for traditional players in the space.

“There remains (and we think will always remain) a place for face-to-face, bespoke quality advice for those with higher value portfolios,” the report states.

Here’d the chart from Citigroup on the growth of robo-advised assets under management (AUM). It offers varying growth trajectory for AUM, and even the most conservative one has Wall Street missing out on trillions of dollars.

Screen Shot 2015 09 03 at 3.23.36 PMCitigroupCitigroup is predicting robo-advisers could take up to $US5 trillion of others’ business over the next decade.

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