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Robo Advisory

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

Overview

Retail trading infrastructure for low-cost and flexible wealth management

Retail trading and wealth management have seen significant changes as a result of digital transformation. Among these, the emergence of robo-advisory platforms has been among the most notable developments. 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.

Apart from robo-advisory services, online trading platforms have also emerged as a tool for investors to trade various securities such as stocks, ETFs, and options directly via digital platforms, luring investors with commission-free trading facilities. While robo-advisors offer investors a passive form of investing, online trading platforms enable investors to actively engage in day-to-day trading activities.

What's driving this industry?
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
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Market Mapping

Market Mapping

The retail trading industry comprises robo-advisors, online trading platforms, and digital infrastructure providers. Among robo-advisors, the industry is further split into three segments, based on their product offering (hybrid vs. digital) and target market.

Robo-advisors that offer hybrid services to consumers contribute to the bulk of companies in the industry and include established players such as Wealthsimple, Betterment, and Scalable Capital. This segment also hosts several incumbents such as Vanguard, Charles Schwab, and Wells Fargo. Robo-advisors that are digital pure players include the likes of M1 Finance, Acorns, and Wealthfront, while those that offer B2B services are limited and include a few companies such as Guideline and Blooom.

Online trading platforms mainly focus on directly offering trading options to consumers and include established players such as Robinhood and Webull. Players in the space have also branched out to offer cryptocurrency trading and banking services.

Incumbents
Growth
Early
Seed
Pre-Seed
B2C: Hybrid (Digital and Human)
?
B2C: Digital Pure Players
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B2C: Online Trading Platforms
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B2B2C: Hybrid (Digital and Human)
?
B2B: Digital Wealth Management Solutions
?
B2B: Robo Advisory Infrastructure Solutions
?
AssetBuilder
AssetBuilder
AssetBuilder
AssetBuilder
AssetBuilder
AssetBuilder
Vanguard
Charles Schwab
Empower Retirement
SoFi
Morgan Stanley
Capital One
BlackRock (Future Advisor)
Wells Fargo
UBS
Goldman Sachs
JPMorgan
TD Bank
Merrill Edge (Bank of America)
Ally Financial
Wealthsimple
Betterment
Scalable Capital
Moneyfarm
SigFig
Ellevest
Nest Wealth
Netwealth
Profile Pension
AssetBuilder
Titan
Domain Money
Wealthface
Smart Money Invest
Justwealth
Invisor Financial
Fintuity
Fidelity
Morgan Stanley
Axos Bank
TD Bank
M1 Finance
Acorns
Wealthfront
Liqid
Wahed Invest
ComposedPro
Marstone
Aghaz Investments
Hemista
Brains Investing
Helium Investments Inc.
Nuku
InvestPlex
Ursa
Huygens
Allio
Fidelity
SoFi
Morgan Stanley
Merrill Edge (Bank of America)
Ally Financial
Tastytrade
Robinhood
Trade Republic
Public.com
eToro
Freetrade
Webull
TradeZero
BUX
Capital.com
Domain Money
Tradier
Wealthface
Moomoo
Vanguard
BlackRock (Future Advisor)
Betterment
Guideline
Blooom
SaveDay
Smart Money Invest
Addepar
Moneyfarm
Vise
Simon
Nest Wealth
Netwealth
Altruist
d1g1t Inc.
Wealth Access
Responsive
Pascal Financial
Scalable Capital
d1g1t Inc.
Tradier
Invessence
Marstone
Nucoro

The Disruptors

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.

Among online trading platforms, Robinhood stands as the largest player and is also the only publicly-traded company in the space, having been listed on the NASDAQ in July 2021 at a valuation of USD 32 billion. Other notable players include Trade Republic, Public.com, and eToro, who have collectively raised close to USD 1.5 billion in funding to date.

B2C: Hybrid (Digital and Human)

?

Disruptors

?
Funding in USD Millions
Wealthsimple
900
Betterment
435
Scalable Capital
314
Moneyfarm
187
SigFig
120
Ellevest
100
Titan
73
Nest Wealth
56
Netwealth
51
Domain Money
22
Profile Pension
17
Justwealth
Unknown
Watchlist
?
Fintuity
Wealthface
Smart Money Invest
Invisor Financial
AssetBuilder

B2C: Digital Pure Players

?

Disruptors

?
Funding in USD Millions
M1 Finance
323
Acorns
207
Wealthfront
205
Liqid
191
Wahed Invest
40
Marstone
20
Watchlist
?
Allio
Aghaz Investments
Hemista
ComposedPro
Brains Investing
Helium Investments Inc.
Nuku
InvestPlex
Ursa
Huygens

B2C: Online Trading Platforms

?

Disruptors

?
Funding in USD Millions
Robinhood
Public - Market cap USD 10.8 bn
Trade Republic
996
Public.com
309
eToro
273
BUX
116
Freetrade
107
Capital.com
25
Domain Money
22
Webull
Unknown
TradeZero
Unknown
Watchlist
?
Tradier
Wealthface
Moomoo

B2B2C: Hybrid (Digital and Human)

?

Disruptors

?
Funding in USD Millions
Betterment
435
Guideline
339
Blooom
13
Watchlist
?
Smart Money Invest
SaveDay

B2B: Digital Wealth Management Solutions

?

Disruptors

?
Funding in USD Millions
Addepar
644
Moneyfarm
187
Vise
128
Simon
100
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
Watchlist
?
Tradier

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. Further, in December 2021, it sold its UK business book to Moneyfarm, following its decision to cease its UK operations and focus on the Canadian market.

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. In December 2021, it also announced plans to launch Wealthsimple Trade Plus—a new subscription service for trading US stocks with no currency conversion fees—in January 2022. 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%. Wealthsimple Trade Plus is expected to have a monthly subscription fee of CAD 10 (~USD 8).

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
Betterment
Scalable Capital
Moneyfarm
SigFig
Ellevest
Titan
Nest Wealth
Netwealth
Domain Money
Profile Pension
Fintuity
Wealthface

B2C: Digital Pure Players:

M1 Finance
Acorns
Wealthfront
Liqid
Wahed Invest
Marstone
Allio
Aghaz Investments
Hemista
ComposedPro
Brains Investing
Helium Investments Inc.

B2C: Online Trading Platforms:

The Incumbents

Incumbents mainly enter the retail trading 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.

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.

Many large incumbents have branched out to develop both robo-advisory services and online trading platforms. Morgan Stanley, for instance, developed and launched its own robo-advisory service “Access Investing” in 2017. In 2020, the company entered the online trading space by acquiring E*Trade Financial Corporation.

In-house development

Acquisition

Partnership

company-logo-0Vanguard
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company-logo-1Charles Schwab
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company-logo-2Fidelity
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company-logo-3Empower Retirement
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company-logo-4SoFi
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company-logo-5Morgan Stanley
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company-logo-6Capital One
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company-logo-7BlackRock (Future Advisor)
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company-logo-8Axos Bank
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company-logo-9Wells Fargo
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company-logo-10UBS
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company-logo-11Goldman Sachs
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company-logo-12JPMorgan
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company-logo-13TD Bank
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company-logo-14Merrill Edge (Bank of America)
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company-logo-15Ally Financial
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company-logo-16Tastytrade
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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

No investor data is available

Funding data are powered by Crunchbase
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