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The Emerging Investors: Keys to the Growth of Digital Wealth

May 28, 2020


4 min read

The Rainbow After The Storm

Rising from the ashes of the 2008 financial crisis, the future of Robo-advisors seemed promising. In 2016, KPMG projected Robo-advisor’s assets under management (AUM) to reach US$2.2 trillion by 2020. Meanwhile, Deloitte projected it to reach US$16 trillion by 2025. 

Although some may say the projections were too optimistic; with less than US$1 trillion AUM as of 2019. Nonetheless, Robo-advisors are on the cusp of a revolution in wealth management. 

As with any new product market adoption, there’s always a gestation period.

This begs the question – when will the exponential growth kick in? Driven by a new wave of tech-savvy, digitally dependent investors, the era of Robo-advisors is definitely now.

Upcoming Digital Investors

Born into the digital age, Millennials and Gen Z make up 63.5% of the world’s population as of 2019. 

They are the generation that grew up with smartphones and social media, creating an inseparable relationship between them. Tech-savvy and comfortable placing their trust in technology, investing through Robo-advisors is their preferred choice.

Source: Deloitte

A study on affluent millennials investing behavior shows the stark difference in the adoption rate of Robo-advisors across the different generations – Millennials and Gen Z ranked significantly higher than the Baby Boomers. 

Source: Spectrum Group

Even within the different groups of investors – ultra-high net worth (UHNW), millionaires, and mass affluent – the same pattern can be observed

  • Amongst the UHNW investors, 56% of the Millennial and Gen X respondents use Robo-advisors, compared to only 13% of Baby Boomers. 
  • Among Millionaires, the gap is much wider, with 62% of Millennials, 24% of Gen X, versus a low of 10% Baby Boomers using Robo-advisors. 

The Untapped Investors

In 2018, according to a Gallup Economy and Personal Finance Poll, only 37% of adults aged 35 and below owned any stocks. On the flip side, the poll uncovered a huge potential addressable audience of 63% of the population for wealth managers to engage.

According to the same poll, the lack of knowledge and prohibitive management fees deterred many from the stock market. However with Robo-advisors, this will no longer be the case. 

The lower barriers of entry and automation of portfolio management have democratized the investment arena for all. With easier access to investment opportunities, everyone is now able to participate in the game of wealth via institutional bonds, emerging market equities, and even exotic rare minerals ETFs! 

A Snapshot of Investor Households in America report by Finra showcases the demographics of the uninvested – more than 50% of households with an income of more than US$50,000 but have no investment accounts at all. 

Source: US Securities and Exchange Commission

New Wave of Emerging Investors

With these new waves of investors reaching financial adolescence, Robo-advisor offers them an easy path onto their investment journey. Experts predict that the industry is poised to reach US$1.4 trillion in assets this year – this equates to a 47% growth in AUM and 70.5 million new users.

With the proliferation of Robo-advisors, US being the epicenter, the popularity of Robos has since spread across the globe. The UK is forecast to hit US$24 billion market value this year whilst in Singapore and Hong Kong, we have witnessed strong growth figures with AUM increasing by 400% over the past five years.

Source: Deloitte

The low-cost structure of Robo-advisors has allowed wealth management services to expand beyond traditional clients. Advisors are now able to engage younger, tech-savvy clients with a click of a button. 

Adding further fuel to the growth of Robos, a survey found that over 50% of investors prefer making their investment decisions in the absence of a financial advisor. 

Source: Deloitte

Digital Wealth in 2023

According to Statista, the Robo-advisory industry will reach US$2.55 trillion with 147 million users by 2023 – 11 times the number in 2017. Moreover, the figures are on the conservative side, as it only reflects active users of Robo-advisors while excluding wealth managers who manage their clients’ portfolios. 

With the new generation of digital-native investors, the move to digitalization is inevitable. Robo-advisors have gone from a nice to have to a must-have for financial institutions worldwide. With Bambu GO, a ready-to-go Robo-advisor solution, anyone can now have a seat at the wealth tech table.

At Bambu, we deploy white-labeled Robo-advisors that enable financial institutions at scale. With our smart portfolios algorithms and machine learning capabilities, your users can achieve their financial goals through a user-centric wealth journey with you. Schedule a demo to find out more.

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