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Robo-advisers surging in demand amid COVID crisis

Robo-advisers surging in demand amid COVID crisis

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By Tony Zhang ·
June 10 2020

Robo-advisers surging in demand amid COVID crisis

In the last few months, research has shown a surge in the number of investors using robo-advice services globally.

Robo-advisers surging in demand amid COVID crisis
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Despite the market volatility caused by COVID-19, US robo-adviser pioneers Wealthfront and Betterment confirmed that March was one of the strongest months for account growth.

According to data gathered by UK investment hub BuyShares, the global robo-advice industry is expected to reach $987.4 billion in value in 2020, growing by 19.3 per cent year-on-year. The strong upward trend is set to continue in the following years, with the global market experiencing a compound annual growth rate of 26 per cent and reaching $2.4 trillion by 2024.

Previously, Birling Wealth Management principal adviser Mark Malone told the ifa Advice Practice of 2020 Roundtable, partnered by Iress, that robo-advice models meet both client expectations and adhere to the FASEA code of ethics.

Back in 2017, assets under management in the robo-advice segment amounted to $297.7 billion. Over the next two years, this figure jumped to $827.4 billion. Statistics indicate market volume has increased by 230 per cent in the last three years.

The average assets under management per user in the robo-advice segment amounted to $4,398 in 2020. This figure is anticipated to rise to $5,700 in the next four years.

According to BuyShares, the low-cost automated accounts available through robo-advice have been especially attractive to younger tech-savvy investors looking to grow their savings before retirement.

The group quoted data from German data portal Statista which revealed that in 2017, there were 42.7 million users with assets managed by robo-advisers. Over the last three years, this number jumped to more than 224.5 million, growing by 49.6 per cent year-on-year. 

In Scandinavia, the use of robo-advisers at the biggest Nordic banks has also recorded their best quarter since being switched on, indicating the COVID-19 crisis could be triggering increased customer interest in money and investing. 

But the banks behind the bots say the development has also laid bare where human financial advisers add no value, and robots do. At the biggest Nordic bank, Nordea, its robo-adviser drew in roughly 40 per cent more users than human advisers.

However in the UK, recent research by economists in the nation’s Financial Conduct Authority has provided a different insight into the receptiveness of robo-advice. 

The research, carried out with a representative sample of 1,800 people, suggests that there is “substantial resistance” to robo-advice among consumers.

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