Market Updates

Robo-Advisors to Leverage the Wealth Management Systems

November, 2018

Overview

Over the last couple of years, the market witnessed the rise of FinTech and it is radically disrupting the financial services sector. The wealth management software is being augmented with robo-advisors which helps in better decision making in wealth and asset allocation. Between 2016-18, there has been significant deployment of robo-advisors in Europe, especially in Germany and UK. Currently, the market size of robo-advisors is very small; however, it is expected to flourish upon realizing the full potential of robo-advisors in wealth management.

 Key Areas

Advisory: Robo-advisors offer automated services using machine learning to advice profitable investment options in the market and manage investment portfolios. It can efficiently replace human advisory with help of a strong algorithms reducing the overall costs for financial advisory. By 2025, the Asian market is expected to grow rapidly and reach a market size close to North America and Europe. The robo-advisors can significantly help investors to manage their multiple investment portfolios in a single platform.

Investments: Investments in WealthTech grew from approximately $1 billion in 2014 to $2.5 billion in 2017 with more than 28% CAGR. Most of the investment came from large deals valuing over $100 million per deal. Some of the active WealthTech investors in the period 2014 – 2017 are Financial Solutions Lab, Y Combinator, Ribbit Capital, 500 Startups, Techstars, Crowdcube, Valar Ventures, and QED Investors. Goldman Sachs, for instance invested around $400 million in AI, making it the largest investment by any firm in the world for covering payment, insurance, wealth insurance, wealth management, consumer finance, among others.

The investments on specific new age technologies by financial institutions and venture capitalists forms an interesting ecosystem for WealthTech, as the startups as well are mostly funded by venture capitalists or financial institutions. Also, many financial organizations are investing on acquiring technologies to develop wealth management application, and many other applications for their internal process improvements or offer advanced software application to its clients. The investments in WealthTech is poised to grow that is witnessing significant investments in 2018 and expected to revolutionize the wealth management systems with adoption of robo-advisors.

– Swarup Bhowal,
Research Analyst - ICT,
Infoholic Research