Global Robo-Advisory Market (2018-2023)

Global Robo-Advisory Market (2018-2023)

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  Prepared by NetscribesInc. Proprietary and Confidential, Copyright © 2018, Netscribes, Inc. All Rights Reserved The content of this document is confidential and meant for the review of the recipient. Disclaimer: The names or logos of other companies and products mentioned herein are the trademarks of their respective owners Global Robo-advisory Market (2018-2023) September, 2018 Sample report
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  2 1.1. Market scopeand segmentation Segments Sub-segments By product type By client assets Pure robo-advisors Hybrid robo-advisors North America Europe Asia-Pacific (APAC) Latin America (LATAM) Middle East and Africa (MEA) By region Globalrobo-advisorymarket Pension funds High-net-worth individuals (HNWI) Insurance companies Mass affluent Sovereign wealth funds
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  3 1.2. Key questionsanswered in this report Globalrobo-advisorymarket  What is the market scope and segmentation of the global robo-advisory market?  What is the historical, current and forecasted market size data for the global robo-advisory market, by revenue?  What are the drivers and challenges of the global robo-advisory market?  What are the market trends that are instrumental in the growth of the robo-advisory market?  What is the historical, current and forecasted market size data for the global robo-advisory market, by revenue, for segment 1?  What is the historical, current and forecasted market size data for the global robo-advisory market, by revenue, for segment 2?  What is the regional scope of the global robo-advisory market?  What is the region-wise (North America, Europe, Asia-Pacific, Latin America, and the Middle East & Africa) historical, current and forecasted market size data for global robo-advisory market, by revenue, for segment 1?  What is the region-wise (North America, Europe, Asia-Pacific, Latin America, and the Middle East & Africa) historical, current and forecasted market size data for the global robo- advisory market, by revenue, for segment 2?  What are the highlights and key takeaways for the regional segmentations of the global robo-advisory market?  Which are some of the major companies operating in the global robo-advisory market? What is covered What you get – impact  Understand the demand for robo-advisors to determine the viability of the market  Determine the developed and emerging markets where robo-advisory services are provided  Identify the challenges in the industry and address them  Develop strategies based on the drivers, trends and highlights, for each of the segments  Evaluate the value chain to determine the workflow and to get an idea of the current position where you are placed  Identify the key competitors in this market and respond based on the competitive positioning of the market players  Knowledge of the initiatives and growth strategies taken by the major companies and decide on the direction for further growth  Define the competitive positioning by comparing the products and services with the key players in the market
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  XX% XX% Hybrid Pure XX% XX% XX% XX% XX% Mass affluent HNWI Pensionfunds Insurance companies Sovereign wealth funds XX% XX% Hybrid Pure XX% XX% XX% XX% XX% Mass affluent HNWI Pension funds Insurance companies Sovereign wealth funds 4 2018 USD XX Bn 2023 USD XX Bn 2018 USD XX Bn 2023 USD XX Bn 2018 USD XX Bn 2023 USD XX Bn 2018 USD XX Bn 2023 USD XX Bn Global market share by type Global market share by client assets 2018 2023 20232018 1.3.1. Executive Summary (I) North America Latin America Europe The Middle East & Africa Asia-Pacific 2018 USD 4.45 Bn 2023 USD 34.05 Bn
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  5 North America XX 4.45 34.05 20152018 2023 XX% XX% Hybrid Pure XX% XX% Hybrid Pure XX% XX% XX% XX% XX% Mass affluent HNWI Pension funds Insurance companies Sovereign wealth funds XX% XX% 15% XX% XX% Mass affluent HNWI Pension funds Insurance companies Sovereign wealth funds 2018 2023 20232018 North America market share by type North America market share by client assets 1.3.2. Executive Summary (II)
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  6 2.1. Global marketoverview Fig 1: Global historical market revenue (USD Bn) Fig 2: Global forecasted market revenue (USD Bn) CAGR (2015-2017): XX% Robo-advisory refers to a gamut of independent financial planning services for investment management requiring moderate to minimal human intervention. Robo-advisors provide financial advice which are driven by algorithms. These services are used to allocate, manage and optimize clients’ assets. The application areas include tax-loss harvesting, investment selection, retirement planning, etc. CAGR (2018-2023): XX% XX XX XX 2015 2016 2017 XX XX XX XX XX XX 2018 2019 2020 2021 2022 2023 Market challenges • Definition and suitability of financial advice – A key challenge for robo-advisor platforms is to identify the extent of provisions for financial advice and the regulations governing them. The regulations stipulate that the recommendations are only advice personalized according to the clients’ requirements and not any general recommendation. The personalized recommendations need to be clearly defined depending on the customers’ personal goals and choices. • High acquisition cost along with low revenue yield – The main challenges of the robo-advisory model are high client acquisition costs and the ongoing costs of servicing clients. Low revenue yield on client assets is also a major factor that is inhibiting the growth of the global robo-advisory market. • Conflicts of interests – The algorithms governing the robo-advisors help in removing the advisory bias to a large extent. However, each robo-advisory platform has a preference for specific investment products and hence may raise the concern of conflict of interest from the customers. These platforms, which are sometimes owned by investment management firms, tend to promote its own products. As the customer is paying a service fee for obtaining the robo-advisory services, the cost incurred by the customer goes up without any substantial benefit, thereby acting as a disincentive while availing robo-advisory services.
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  7 Increased objectivity, consistency andtransparency The standard profiling of clients for assessing their goals and risks by a human advisor involve elements of emotional or subjective judgment, resulting in a bias. The algorithms governing the robo-advisory platforms help in removing such bias in financial advice to a large extent, thereby allowing for consistent recommendations for clients. This promotes reliability and transparency between the robo-advisors and their respective clients, which in turn, help in the growth of the robo platforms. Increasing competition with entrants and diversified services The increasing number of competitors in the market leads to a diversified range of robo-advisory services. The players offer a broad palette of products and services with varying prices and technology offerings. Rising internet penetration along with technology upgradation Rising income levels coupled with rising internet penetration assist robo-advisors to provide everything from automated savings products to complex clients’ needs for investment solutions. Living in a digitalized world, the digitally savvy investors are are now keen on availing services such as those provided by the robo-advisors. Armed with the new machine learning algorithms, robo-advisors are able to provide accurate and specific advice to the investors. Increased affordability and accessibility Robo-advisors reduce the cost of financial assistance. The use of algorithms help in the automation of services provided by robo-advisors, resulting in efficient management of portfolios. While reducing investments and search costs, robo-advisors also make it easier for individuals to decide on, and monitor their investments. Robo-advisory platforms are user-friendly and easy to understand, thereby making it easier to navigate for wider audiences. These benefits associated with robo-advisors encourage individuals to invest. 2.2. Global - market drivers
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  8 Technology advancements Technology advancementsact as a key enabler for the robo-advisory market. Advancements in machine learning algorithms and artificial intelligence have helped robo-advisors to scale up and meet the specific needs of the investors. Along with that, the lower cost of computing and storage has brought robo-advisory services within the reach of common people. Growing adoption of hybrid robo models The combination of human and robo-advisors, i.e., the hybrid model of robo-advisory is taking over the wealth management market. As consumers demand detailed guidance, robo-advisors are relying on human intervention to provide customized solutions and services. Some of the companies that provide hybrid models are Betterment, WealthSimple, Personal Capital, Vanguard, etc. Ritholtz Wealth Management launched a robo-advisor named Liftoff to support their lower-net-worth clientele. Migration of wealth between generations Baby boomers are on the brink of retirement, implying that they will be keen on shifting their assets to generate retirement income. Those among them who are seeking to transfer their wealth to the next generation, see investments as the ideal method of doing so, thereby creating demand for wealth management. This will in turn propel the robo-advisory market. Historically, baby boomers in Asia preferred traditional financial advisors. However, the robo-advisors in the Asia-Pacific region are trying to catch up with their counterparts in the U.S. and hence have the highest growth rate in the forecast period. The Latin America and the Middle East & Africa regions are at nascent stages and increasing at a considerable rate, thereby pushing baby boomers to relocate their wealth through automated financial advice platforms. Rising number of start-ups A large number of start-ups and financial institutions offering robo-advice are entering the market leading to a consistent growth. Initially, the robo-advisory services were catering to individuals who had limited budget and less experience in investing. But, recently the increased competition in robo-advisory services has resulted in adding new and differentiated products. Recently, Wealthfront Inc., introduced a tool that helps in minimizing investment risk for customers having an investment budget of more than USD100,000. 2.3. Global - market trends
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  9 Market observations 3.1. Regionalmarket overview – North America Fig 5: North America historical market revenue (USD Bn) Fig 6: North America forecasted market revenue (USD Bn) CAGR (2015-2017): XX% CAGR (2018-2023): XX% XX XX XX 2015 2016 2017 XX XX XX XX XX XX 2018 2019 2020 2021 2022 2023 • North America is the largest market for robo-advisory services with the maximum number of robo-advisory offerings like tax-loss harvesting, investment selection, and retirement planning. It is a mature and well-established market with an expected growth rate of XX% during the forecast period (2018-2023). • An integrated market with a common language makes the North American market extremely lucrative. More than 80% robo-advisors in the U.S. market have 3.0 capabilities that include wide range of automation technologies. These technologies cater to the wide service offerings, from fixed investment strategies to automated portfolio rebalancing proposals based on market movements. • Robo-advisors depend on different optimization strategies to recommend the investment portfolio. It has been observed that in the last five years, the U.S. robo-advisors have invested 31% in equity and 61% in fixed-income for a conservative investor. On the contrary, for growth oriented investor, the equity / fixed-income asset allocation is in the ratio of 70:30.
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  10 3.2. Market segmentationbased on types of robo-advisors Fig 7: North America revenue contribution – by different types of robo-advisors, 2018 v/s 2023 XX% XX% Hybrid Pure 2023 USD XX Bn • In North America, the pure robo-advisors handle the complex issues of their clients in an increasingly fast-paced environment, while maintaining low operational costs. In the U.S., pure robo-advisory services cater to mass market products. • Proliferation of Exchange Traded Funds (ETF) in the U.S. market is expected, which will allow much more products available for investment. As the ETFs constitute the key element of pure robo- portfolios, this growth will increase both the supply and demand of robo-advisory services in the U.S. market Pure robo-advisors • The need to cater to tailored solution requirements and complex investment requirements is aiding the growth of hybrid robo-advisors in North America. Betterment - a leading online investment firm - started its hybrid robo services for recommendation and management of portfolios, with on-demand advice from a human being. Earlier, Wealthfront, a major robo-advisor based in Silicon Valley, launched its hybrid-robo advisory platform in 2017. Both Betterment and Wealthfront focus on helping the customers to achieve their personal goals from buying a home to paying for college fees. In the U.S., several investors do prefer more human-like content and tone. Hence, Wealthfront, for instance, has been focusing on enhancing its features to create a better user experience. Hybrid robo-advisors XX% XX% Hybrid Pure 2018 USD XX Bn
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  11 Fig 8: NorthAmerica revenue contribution – by different client assets, 2018 v/s 2023 3.3. Market segmentation based on types of client assets • Robo-advisory in its early days targeted investors who have limited investment capacity. However, the advent of new start-ups has led to an increased competition to acquire bigger clients with large investment portfolios. U.S. based online investment firm, Betterment already boasts of 750 clients who qualify for high net worth individuals (HNWI). With regular upgradation of latest technology such as automatic asset allocation, and self-learning algorithms, the robo-advisors are becoming far more equipped to manage large and complex investment products. As a result, the HNWI segment held the largest market share of the robo-advisory market in North America in 2017 and is anticipated to maintain its dominance throughout the forecast period of 2018-2023. • In the U.S., robo-advisors offer Individual Retirement Accounts (IRAs) focusing mostly on servicing the pensions in the accumulation phase. The services don’t look at the decumulation phase as the level of complexity is much higher to be handled through automated services. Despite that, the pension fund assets managed by robo- advisors have witnessed high growth from USD XX Bn in 2018 to USD XX Bn by 2023. XX% XX% XX% XX% XX% Mass affluent HNWI Pension funds Insurance companies Sovereign wealth funds XX% XX% XX% XX% XX% Mass affluent HNWI Pension funds Insurance companies Sovereign wealth funds 2018 USD XX Bn 2023 USD XX Bn
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  12 Twins Michael Kaneand Mathew Kane founded the financial services company Hedgeable, Inc. in 2009. It is registered with the U.S. Securities and Exchange Commission. This digital wealth management platform provides web and mobile applications for customers looking for personalized investment portfolios. The company specializes in tactical investing, which includes no fixed set of allocations but manages the accounts actively in response to market movements. • Sophisticated portfolio customization • Automated intelligent rebalancing • Robust platform features Company snapshot 8.6. Company overview – Hedgeable, Inc. • In 2015, Hedgeable, Inc. launched the bitcoin prediction page to include bitcoin allocations pay-off for investors. The addition of bitcoin to portfolios provides diversification and also offers exposure to the advanced blockchain technology sector. • Hedgeable, Inc.’s platform offers services which include a feature named Tax Samurai, that is run by the AI named ‘Katana’ to target high-net-worth individuals. The next generation of AI in wealth management is expected to use rules or models which are crafted by scientists. Major initiatives/highlights Founded: 2009 Headquarters: New York, U.S. Employees: 11-50 (2017) Key people: Michael Kane and Mathew Kane (Founders) Website: www.hedgeable.com Growth strategy Hedgeable offers customized portfolio management that appeals to their target market: socially-responsible investing, income investing, bitcoin investing, and even venture capital funds, as some of their clients are involved with private tech companies. The company also hands out rewards like Golden State Warriors or New York Yankees tickets, or even tech prizes, like virtual reality headsets, in order to encourage people to save. Hedgeable offers application program interface (API) to enable developers at investment firms, banks, brokerage firms, and credit card companies to log onto their platform. Services
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  Appendix 13 Research methodology The studybegins with identifying the right research question(s). The question depends on what we are going to achieve by conducting the research or what we want to convey to the prospective customers through this research. Next we identify the logical steps to arrive at the answers to the question(s). These logical steps form our research objectives. The research objectives provide us a guideline regarding what information we need to conduct analysis. We strongly believe that clear objectives will lead to clear results about the given market The next stage of the research is conducted utilizing the secondary sources of information, process called desk/secondary research. Netscribes Inc. has a considerable volume of information in both quantitative and qualitative forms, across all major industries and its sectors. Also, we conduct in-depth study of the market, understanding its key stakeholders, drivers, trends, challenges and opportunities globally covering major regions such as North America, Latin America, Europe, Asia Pacific, and Middle East & Africa. The key sources consumed for these research include (but not limited to) the following:  Financial reports published by the key market players  Government and other official sources including the National Statistics  National and International trade associations  Paid databases  Other reliable sources The qualitative and quantitative findings from the above stages are brought together by specialists to perform a rigorous analysis. The regional market trends, drivers, and opportunities obtained during the analysis is compared with regional economic indicators, sector growth rates, population index, etc. to ensure the data consistency. After ensuring the consistency, these historical and present indicators help us to understand how the market will perform in future. Our proprietary forecasting model factors in all these indicators to predict the future market accurately. Primary research complements the secondary research, as and when required, as it helps us to gain insights from the industries directly by communicating with the senior executives, key opinion leaders and independent consultants who are experts in their industries or specific industry sectors. Such interviews are conducted across the value chain of the market in question. A survey questionnaire is usually prepared for conducting any primary interview or survey. The questionnaire is developed with utmost care to fulfil the key research objectives and also to validate the assumptions about the market. This supplements the information otherwise unaddressed via secondary research. The primary data collection is done by expert interviewers who have specific industry knowledge. Linguists are hired to conduct interviews in the respondent’s native language. Some of the primary research methods applied at Netscribes include the following:  In-depth Interviews  Executive Interviews  Expert Panels
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  Appendix 14 About Netscribes Inc. MBA 28% Graduates 22% BE 20% BCA/MCA 12% CPA/CA/CFA 8% Others 10% MultidisciplinaryTeam Netscribes provides end-to-end research-driven solutions that help clients meet their growth objectives by collaboratively transforming information into business advantage. In-house Research Data VisualizationGlobal CoveragePanel Expertise Premium Databases We utilize an in-house resource model to provide our clients with actionable insights Specialized panel of senior executives, analysts and practitioners Extensive experience of working on various premium databases Ability to conduct research across the globe in multiple languages Ability to present complex data insights in crisp, easy-to- understand visuals Global market intelligence and content services provider Venture-funded by US based private equity firm Helix 700+ member delivery team across Mumbai, Kolkata and Gurgaon, and sales presence in Singapore and the USA Revenue composition: USA: 50% Europe/MENA: 30% APAC: 20% Official ESOMAR member Owns: – Inrea Research – OnSense – Research on Global Markets
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  Thank you foryour attention 15 Global Robo-advisory Market (2015- 2023) report is part of Netscribes’ ICT Industry Series. Research on Global Markets is the online publisher for Netscribes' market intelligence reports. For further assistance: US Toll Free: 18888313350 India: +91 33 4027 6243 [email protected] Disclaimer: This report is published for general information only. Although high standards have been used in the preparation, Netscribes is not responsible for any loss or damage arising from use of this document. This document is the sole property of Netscribes and prior permission is required for guidelines on reproduction.