Robo-advising is gaining traction with younger investors and will become a trillion-dollar industry one day – and even Wall Street banks are willing to admit it. This comes from a September 3 report from Citigroup, titled “Rise of the Machines: Retail Revolution.” In just two years, the report notes, robo-advisers have boosted their assets from virtually nothing in 2012 to $14 billion by the end of 2014. And they’re just getting warmed up. Over the next 10 years, their assets under management could expand exponentially, to $5 trillion, the report speculates. Already big corporate players like Charles Schwab and BlackRock have taken notice. Schwab launched online-wealth-management tools of its own earlier this year, and BlackRock decided to buy instead of build, purchasing FutureAdvisor last month. LPL Financial Holdings and RCS Capital Corp. in the US are facing the greatest risks, according to Citi, along with Hargreaves Lansdowne and St. James Place in Europe. The note said: “We expectdownward pressure on advisory fees throughout the industry as the prevalence ofRobos picks up – likely causing a perceived/real impact on LPLA’s and RCAP’srevenues and margins.” Big banks that also provide wealth advisory services have to be watching the progress of their stealthy, smaller competitors, especially if they want to hold onto their trillion-dollar lines of business as the industry increasingly shifts digital. Fortunately, Citi also has encouraging words for traditional players in the space. “There remains (and we think will always remain) a place for face-to-face, bespoke quality advice for those with higher value portfolios,” the report states. Here’s the chart from Citigroup on the growth of robo-advised assets under management (AUM). It offers varying growth trajectory for AUM, and even the most conservative one has Wall Street missing out on trillions of dollars.
A report from Citigroup entitled 'Rise of the Machines: Retail Revolution' suggests that robo-advising is gaining traction with younger investors and looks set to become a trillion dollar industry. The report, which was commissioned by Citi in partnership with McKinsey & Company, says that more than half (52%) of millennials aged 18 to 34 are planning on investing their money into an investment adviser. However, the report also states that 'there remains (and we think will always remain) a place for face-to-face quality advice'.