The robo-advisors market has experienced massive growth during the pandemic, with more investors than ever using these digital platforms for automated, algorithm-driven investment services. Last year, the entire industry hit over $1trn value, despite the market volatility caused by the COVID-19. However, the following years are set to witness even more impressive growth.
According to data presented by Block Arabia, the total value of assets under the management of robo-advisors is set to double in the next two years and hit over $2trn value.
The Entire Industry Growing by a Massive Annual Growth Rate of 30%
Robo-advisors are online platforms that use complex algorithms to create investment portfolios based on the client’s information when signing up for an account. Due to their low fees, ease of use and small opening balance, they are an excellent choice for entry-level investors.
However, after COVID-19 struck, the signups for robo-advisory services have surged like never before, and there are several reasons for that.
The most significant benefit of robo-advisors is that they make decisions based on real-time statistics, eliminating poor decision-making or spontaneous buy or sell decisions. Also, their low-cost fees, usually from 0.25% per year, are much cheaper than the conventional stockbrokers and other alternatives.
The Statista survey showed that in 2020, the robo-advisors hit a $1trn benchmark, with the total value of assets under these digital platforms increasing by 30% in a year. The entire market is expected to grow by another 33% in 2021 and hit over $1.4trn value.
In the next two years, this figure is set to increase by another $712bn, and by 2025, the robo-advisors market is forecast to hit a $2.8trn value.
Statistics show the average assets under management per user are also expected to increase in the following years. After falling from nearly $7,000 in 2017 to $4,757 in 2020, this figure is set to reach $5,500 in the next two years.
More than 140M People Started Using Robo-advisors Since Pandemic Struck, China the Largest Market
Automated accounts are generally cheaper because they use computer algorithms instead of human money managers. That is why they have been especially attractive to younger tech-savvy investors looking to grow their savings before retirement.
Between 2017 and 2019, the number of people with assets managed by robo-advisors tripled and hit over 150 million globally. However, another 140 million people started using robo-advisors after the pandemic struck, with the total number of users rising to 292.8 million. The Statista data revealed that the number of investors using robo-advisor financial planning services would increase to 393.7 million by 2023, nearly three times more than pre-pandemic figures.
Analyzed by geography, the United States represents the world’s leading robo-advisors industry, expected to reach nearly $1trn value this year. However, compared to China, as the second-largest market globally, the US has far less users.
In 2021, the number of people using robo-advisors in the United States is set to touch 11 million, fifteen times less than China that will count over $170 million users. One-third of them are aged between 25 and 36 years old.
By 2023, the number of users in the Chinese robo-advisors market will reach 217 million, or more than half of all users globally.