The rise and fall of the robo-advisor

We’ve worried about them, competed against them and now we can forget about them suggest new numbers charting their growth

While the rise of technology and the emerging robo-advisor marketplace has kept the industry on its toes, it seems wealth professionals can breathe once again as new research says the threat of direct-to-consumer automated-advice may be shrinking.
A survey by the Tiburon Research Group, a premier independent equity research boutique, found that while advice on the online market will continue to grow, it’s the defined-contribution companies that will see most of the growth. Those platforms offering direct-to-consumer automated-advice will actually decrease.
While the increase in defined-contribution companies isn’t necessarily good news for planners, the idea that there may be less online tools offering the services real industry people offer is.
Currently, such online wealth management services offer advice based on automated algorithms. Their service may not be personalised and face-to-face however many opt to use them because they are a lot cheaper, easy to use and accessible without leaving home.
This new research indicates that such services will decrease over the next few years leaving planners in a good place to tap in with new clients and have fewer companies to compete against.
One idea is that with over 200 wealth consumer advice platforms online, they cannot all survive with limited client numbers and limited assets. Over the years it can be expected that some will fold and others will be purchased and merge.
The Tiburon Research Group, a San Francisco based company, cites online-advice space will grow to $655.2b by 2019 however much of that will be because of an increase in defined-contribution companies. Many may opt to use such an online service to plan for the future. The number of direct-to-consumer robo-advisors will shrink from 22 to 10 by 2019.
Currently, the biggest online-advice providers for professionals include Financial Engines and Morningstar Retirement Advice while there are many more also offering information, advice and consumer technology.