digital wealth

Analysis of Venture Investment Activity for Digital Wealth Start-ups

Autonomous Research has analysed Venture Investment Activity within the digital wealth sector starting from 2008.  The findings show a surge in venture funding with investments reaching $615 million in 2014 compared to $194 million in 2013. The vast majority of capital was raised in North America, giving rise to digital wealth management start-ups such as Wealthfront and Personal Capital. In 2015, venture funding doubled to $1.3billion resulting from increased investment in Asia and start-ups such as Chunhua Wealth and entered the scene. With considerably smaller venture activity in Europe (and other regions) and investment reductions in Asia in 2016, North America is accounting for the majority of support for digital wealth entrepreneurs.

The second chart analyses the number of companies with seeding rounds targeting digital wealth start-ups across the same time period. We find a surge in companies providing venture funding across all regions from 2014: 56 companies in 2013 to 115 in 2016. Breaking down the companies by region re-affirms that North America offers the majority of venture funding in the wealth tech sector and support of digital wealth start-ups.

Short-Term and Long-Term Projection of Digital Assets Under Management up to 2030

Autonomous Research has estimated the growth of Digital Assets under Management in the short-term and long-term respectively. The short-term base case projection estimates $1.5 trillion in digital AUM by 2020. This figure is driven by our expectation of an increased adoption of Roboadvisors as a result of fiduciary requirements shrinking transactional businesses. In the case of a delayed adoption, our conservative projection estimates $0.5 trillion in digital AUM by 2020.

In the longer term, our base case projection reaches $4 trillion in digital AUM by 2030. However, with growth and ETF-like adoption, where Roboadvisors use passive ETFS to shrink industry fees, we estimate $8 trillion in AUM.  Finally, our Bull case occurs with digital wealth growing into HNW with early adoption across orphan accounts and the high-end mass affluent. This would lead to $17 trillion in digital AUM by 2030.