Robo Advisory

Retail investors demanding sophisticated passive investment stategies are looking for an edge.

Overview

Robo-advisory: The future of low-cost wealth management

Robo-advisory platforms use algorithms to provide automated investment advice and management services (asset allocation, portfolio rebalancing, and other related services) based on clients’ investment goals and risk tolerance. Most use either low-cost exchange-traded funds (ETFs) or index funds as investment vehicles. Robo-advisory platforms have an advantage over human advisors as they are easily accessible online, carry out portfolio management tasks for large numbers of clients simultaneously, and involve much lower fees and initial minimum account balances.

What's driving this industry?

Industry Updates

Allio raises USD 5 million in seed funding
Aug 15
Acorns names Rich Sullivan as CFO
Aug 11
Titan launches cryptocurrency offering
Aug 11
View all updates
Market Sizing

Obtained robo-advisory assets under management could reach USD 1.1-1.7 trillion by 2025

Conservative case

USD 1.1 Tn

Base case

USD 1.4 Tn

Expansion case

USD 1.7 Tn

USD billion02004006008001,0001,2001,4001,6001,800202020212022202320242025
View details

Market Mapping

The robo-advisory industry is dominated by its largest players. Most of the leading incumbents and disruptors currently provide hybrid digital wealth management services to individual investors in order to attract the mass affluent group. The majority of top players are in the growth stage.

Incumbents
Growth
Early
Seed
Pre seed
B2C: Hybrid (Digital and Human)
?
B2B2C: Hybrid (Digital and Human)
?
B2C: Digital Pure Players
?
B2B: Digital Wealth Management Solutions
?
B2B: Robo Advisory Infrastructure Solutions
?
AssetBuilder
AssetBuilder
AssetBuilder
AssetBuilder
AssetBuilder
Vanguard
Schwab Intelligent Portfolios
Empower Retirement
SoFi
Capital One
BlackRock Future Advisor
Wells Fargo Intuitive Investors
UBS
Goldman Sachs
JPMorgan
Wealthsimple
Scalable Capital
Betterment
Moneyfarm
SigFig
Ellevest
Nest Wealth
Netwealth
AssetBuilder
Titan
Smart Money Invest
Justwealth
Invisor Financial
Wealthface
Fintuity
Vanguard
BlackRock Future Advisor
Guideline
Betterment
Blooom
SaveDay
Smart Money Invest
Fidelity Go
Morgan Stanley
Axos Invest Managed Portfolios
M1 Finance
Acorns
Wealthfront
Liqid
Wahed Invest
ComposedPro
Marstone
Aghaz Investments
Hemista
Brains Investing
Helium Investments Inc.
Nuku
InvestPlex
Ursa
Huygens
Allio
Addepar
Vise
Nest Wealth
Netwealth
Altruist
d1g1t Inc.
Wealth Access
Responsive
Pascal Financial
Scalable Capital
d1g1t Inc.
Invessence
Marstone
Nucoro

The Disruptors

Top-funded startups have higher chances of scaling up

Wealthsimple stands as the highest funded disruptor in the robo advisory space, with a total of USD 900.4 million as of August 2021. The company is a hybrid operator in the B2C space, combining digital robo advisory with human expertise, and holds a significant lead over the second largest player in the space, Scalable Capital which had USD 314.2 million in funding as of the same date.

Other notable players include Betterment, Wealthfront, and SigFig, which have been around for more than a decade and are well known in the robo advisory space. These companies compete in the mass market by offering a wide variety of features. Both Betterment and SigFig have also partnered with businesses, such as advisory firms and banks, to expand their respective client bases.

Smaller players often differentiate themselves by catering to specific clientele (such as female investors, non-resident investors, Halal investing, and employer-sponsored retirement accounts), responding to the fact that customers tend to feel more secure with personalized services rather than the generic offerings.

B2C: Hybrid (Digital and Human)

?

Disruptors

?
Funding in USD Millions
Wealthsimple
900
Scalable Capital
314
Betterment
275
Moneyfarm
127
SigFig
120
Ellevest
100
Titan
73
Nest Wealth
56
Netwealth
51
Justwealth
Unknown
Watchlist
?
Fintuity
Wealthface
Smart Money Invest
Invisor Financial
AssetBuilder

B2B2C: Hybrid (Digital and Human)

?

Disruptors

?
Funding in USD Millions
Guideline
339
Betterment
275
Blooom
13
Watchlist
?
Smart Money Invest
SaveDay

B2C: Digital Pure Players

?

Disruptors

?
Funding in USD Millions
M1 Finance
323
Acorns
207
Wealthfront
205
Liqid
153
Wahed Invest
40
Marstone
20
Watchlist
?
Allio
Aghaz Investments
Hemista
ComposedPro
Brains Investing
Helium Investments Inc.
Nuku
InvestPlex
Ursa
Huygens

B2B: Digital Wealth Management Solutions

?

Disruptors

?
Funding in USD Millions
Addepar
513
Vise
128
Altruist
59
Nest Wealth
56
Netwealth
51
d1g1t Inc.
22
Watchlist
?
Wealth Access
Responsive
Pascal Financial

B2B: Robo Advisory Infrastructure Solutions

?

Disruptors

?
Funding in USD Millions
Scalable Capital
314
d1g1t Inc.
22
Marstone
20
Nucoro
19
Invessence
Unknown

Wealthsimple

Based in Toronto, Wealthsimple is a hybrid investment management platform that allows individuals to invest in diversified portfolios, according to their risk profiles. The company launched the robo-advisory platform in Canada in 2014, and expanded into the UK and US in 2017. Wealthsimple sold its US-based clients to Betterment in March 2021. In September 2020, Wealthsimple also sold its B2B robo advisory platform—called Wealthsimple For Advisors—to Purpose Advisor Solutions.

The company’s robo-advisory platform features access to financial advisors, automatic portfolio rebalancing, tax loss harvesting, and dividend reinvestment. Over the years, the company has also added other services to help individuals achieve their financial goals such as high-yield saving accounts, commission-free trading, crypto trading, and automatic investing of spare change. As of 2021, the company has more than USD 3 billion in assets under management (AUM).

The basic subscription requires zero minimum account balance and charges a 0.5% annual fee—the same rate as Toronto-based competitor Justwealth. To access financial advisors and more advanced features such as financial planning sessions, the platform requires a higher minimum account balance of USD 100,000 with a reduced annual fee of 0.4%.

In May 2021, the company raised CAD 750 million (USD 610 million) in funding led by Meritech and Greylock, at a post-money valuation of CAD 5 billion (USD 4 billion). The funding will be directed towards developing new products and expanding the company's workforce.

Segment:
B2C: Hybrid (Digital and Human)
Total funding:
USD 900.4 million
Competitors:
Nest Wealth, Justwealth
Disruptor Funding History

B2C: Hybrid (Digital and Human):

Wealthsimple
Scalable Capital
Betterment
Moneyfarm
SigFig
Ellevest
Titan
Nest Wealth
Netwealth
Fintuity
Wealthface

B2B2C: Hybrid (Digital and Human):

Guideline
Betterment
Blooom

B2C: Digital Pure Players:

The Incumbents

Incumbents mainly enter the robo-advisory space through in-house development and acquisitions

The incumbents include financial institutions such as asset management companies, brokerages, advisory firms, and banks. Most provide digital services primarily to accommodate demand for low-cost advisory services from existing clients and sophisticated investors. The incumbents generally charge slightly higher fees than the disruptors (e.g. 0.30% vs. 0.25%) and require higher minimum balances for standard services.

The incumbents have mainly participated in the industry through in-house developments, acquisitions, and partnerships, with the major players commonly developing their own proprietary platforms. With advances in technology, companies have scaled rapidly to dominant positions. Vanguard Personal Advisor Services is the largest robo-advisory platform, managing assets worth USD 231 billion as of May 2021. Schwab Intelligent Portfolios follows, although distantly, with USD 63.6 billion.

Some players made their entrance into the industry marked via acquisitions and partnerships designed to capture market share faster. One of the earliest through this avenue was BlackRock, via the acquisition of robo-advisory startup FutureAdvisor in 2015. More notable recent examples include Goldman Sachs when it acquired United Capital in May 2019 and Empower Retirement when it acquired Personal Capital in June 2020.

Meanwhile, both Wells Fargo and UBS Wealth Management Americas have developed their digital platforms through partnership agreements with SigFig.

In-house development

Acquisition

Partnership

Vanguard
check
Schwab Intelligent Portfolios
check
Fidelity Go
check
Empower Retirement
check
SoFi
check
Morgan Stanley
check
check
Capital One
check
check
BlackRock Future Advisor
check
Axos Invest Managed Portfolios
check
Wells Fargo Intuitive Investors
check
UBS
check
Goldman Sachs
check
JPMorgan
check
Vanguard

Launched in 2015, Vanguard Personal Advisor Services is the largest robo-advisory platform in terms of assets under management (AUM), USD 148 billion according to the company’s Q1 2020 filing. The platform provides hybrid advisory services by combining its proprietary investment modelling technology (Vanguard Capital Markets Model) with human advisors. Human advisors help clients create financial plans and monitor and rebalance portfolios when necessary. Support is also available through phone and videoconferencing. The platform charges 0.30%, similar to most incumbents, but has a higher minimum account balance requirement of USD 50,000. As an account balance increases, fees drop to as low as 0.05%. 

Notable Investors

Funding data are powered by Crunchbase

By using this site, you agree to allow SPEEDA Edge and our partners to use cookies for analytics and personalization. Visit our privacy policy for more information about our data collection practices.