New data from Juniper Research has found that roboadvisors (digital wealth management platforms) under full control of AI systems will reach $987 billion per annum in AUM (assets under management) by 2022.
These fully-automated roboadvisors will represent approximately 25% of total roboadvisor AUM in 2022, and their growth will considerably outpace semi-automated, supervised deployment types with lesser reliance on AI. These roboadvisors are forecast to grow their AUM at close to 155% per annum on average versus 69% growth for the overall market according to Juniper.
Building trust in AI
Juniper’s new research, AI in Fintech: Roboadvisors, Lending, Insurtech & Regtech 2018-2022 found that consumer trust would play a fundamental role in shaping the market during the projection period. For this reason, Juniper predicted that ‘hybrid’ roboadvisors would dominate the market, managing 66% of global roboadvisory AUM in 2022. It noted that human advisor input plays a key role here, serving to allay consumers’ fears of handing management of their cash over to an algorithm.
Nevertheless, the research predicted that while key market forces, such as economic uncertainty and increasing awareness of services would drive the overall market, changing demographics would kickstart demand for fully-automated roboadvisors.
“Digital-savvy millennials are rapidly reaching the age where the idea of financial planning is an important consideration,” noted research author Steffen Sorrell. “This demographic’s greater inherent trust in algorithms, alongside demand for ‘fire-and-forget’ convenience will drive take-up for AI fully-managed services.”
Market consolidation ahead
Meanwhile, the research predicted that market consolidation was highly likely in the near-term, particularly in more mature roboadvisory markets, such as the US.
It argued that strong competition and high customer acquisition costs meant that many services would be unable to reach the AUM ‘tipping point’ necessary to generate profits. Juniper noted this would impact semi-automated roboadvisory services the most, owing to their reliance on human advisors and relatively low AUMs. For these reasons, many service providers would make themselves a target for acquisition.
Juniper Research provides research and analytical services to the global hi-tech communications sector, providing consultancy, analyst reports and industry commentary.