Fully automated ‘robo-advisors’ will have $987bn (£715bn) in assets under management (AUM) by 2022, according to new data from Juniper Research.
Controlled by artificial intelligence (AI) systems, these digital wealth management platforms are also predicted to grow their AUM by around 155% every year, compared to the 69% of growth expected for the overall market.
In addition, it is expected that fully automated robo-advisors will represent a quarter of total digital platforms’ AUM in four years, and that their growth will outpace semi-automated ones by some margin.
“Digital-savvy millennials are rapidly reaching the age where the idea of financial planning is an important consideration,” research author, Steffen Sorrell, said.
“This demographics’ greater inherent trust in algorithms, alongside demand for ‘fire-and-forget’ convenience, will drive take-up for AI fully-managed services.”
It is consumer trust that is expected to play a fundamental role in shaping the market, with ‘hybrid’ platforms – which are supervised by humans – expected to dominate the market in 2022, managing 66% of the global robo-advisory AUM.
This comes after research from ING last year revealed that just 2% of people in Europe, the US and Australia would trust a fully automated robo-adviser to invest their money on their behalf.
It also shows that only 26% would opt for robo-advice, even if they got final approval on all decisions, with one-third not wanting any automated financial activities at all.
In addition, it was found that women are approximately 10% more likely to be uncomfortable with a computer programme investing money for them than men, while older people are also more likely to be uneasy with it.
“It takes a little while for people to get comfortable with new technical possibilities,” ING global head of retail investment product solutions, Martin Krebs, said.
“Twenty-five years ago it was hard to imagine that one day people would entrust billions in savings to online banks – now that’s a daily reality.
“For people looking for an alternative to saving, robo-advice provides a level of service that, until now, was only available to customers with large investment portfolios.”
Financial services companies are looking to digital transformation at a greater rate than most vertical market businesses, and are facing an “acute shortage” of skills as a consequence.
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