ROBO ADVISORS: Robo-advisors are winning but leaving cash on the table

We will keep this brief. In a recently updated, “Robo-Advisors with the Most AUM” the top 5 robo-advisors, consisting of three Fintechs and two Incumbents, remained in the same position as last year, although each of them have seen gains in Assets Under Management (AUM) and the number of accounts. Yet, the jury is out as to whether gathering assets or gathering users are good measures of success -- we wrote about it here.

A lot of digital wealth management innovation targets people who have been excluded from the traditional wealth management business because the amounts they have to invest are too small for the economics of traditional wealth management to work. So the strategy is to target this opportunity by getting to the consumer, earn them loyalty with at least one good service, perhaps free, and then lock them into a full financial services relationship. The expected outcome of this is to see a reduction in the number of these individuals and/or the assets they hold -- Unadvised assets - the liquid cash in real wallets and check & savings accounts.

Daily fintech's Efi Pylarinou, has done the heavy lifting on this, finding unadvised assets in the US, EU, and UK to be around $14.5 trillion, $13.7 trillion, and $3 trillion respectively. Surprisingly, each of these on average have experienced growth of 9% over the past 3 years. Such findings point to the fact that, since their inception, robo-advisors have had none or a negligible impact on unadvised assets. Although unadvised assets are impacted by all innovations in Fintech, robo-advisors are more likely to be the ones that incentivise you to split up with your cash to some degree in hopes of generating returns with very little friction/costs. And if this is a direct result of trends in monetary policy, public markets, and human behavior superseding the digitization of capital markets, when should we expect the reversal to occur?

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Source: Robo-Advisors with the most AUM (via Roboadvisorpros)