The topic of robo-advisors has been part of many of our conversations with subscribers and it has dominated the financial press. Our research has shown that a sizable portion of affluent investors—those with at least $100,000 in investable assets—has readily adopted these services, allocating more than $20 billion of assets to robo-advisors. All told, we can say confidently that robo-advisors are no longer new or emerging—they have arrived.
Robo-advisor technology has existed for years and has been leveraged by emerging brands such as Betterment and Wealthfront, which accelerated the growth of the robo-advisor market, as well as legacy brands such as Charles Schwab’s quick jump in branding its offering as Intelligent Portfolios. But despite the adoption of these offerings, the industry talk and press, when we began our research we soon understood that there are many definitions of a “robo-advisor” in the marketplace and that investors may not be familiar with the term. To help facilitate our research process and better understand the term, Cogent provided our survey respondents with this definition:
“Some financial services firms offer a service that provides investment advice based upon sophisticated computerized models, as opposed to either relying on a financial advisor or managing your assets on your own. This type of service is sometimes called a “robo-advisor.”
Who Is Using Robo-Advisors and Which Robo-advisor Providers Are They Using?
The big surprise to us was that 30% of affluent investors use robo-advice. Nearly two-thirds of robo-advisor users have assets with legacy brands Fidelity Investments, Vanguard or Charles Schwab, and about one-third with emerging brands such as Folio Investing or Betterment. In our discussions with subscribers about these figures, some are shocked at how high usage is among affluent investors, while others nod their head in agreement. To add fuel to the “robo fire,” another 22% of affluent investors are likely to consider robo-advice.
Who are current robo-advisor users?
- More than half (57%) are Gen Xers (31%) or Millennials (26%), which means that the majority of users are age 50 or younger.
- More than half (56%) have investable assets of $100,000 to just under $250,000.
- There is a greater representation within robo-advisor users of females who are the sole financial decision-makers for their household compared with the overall affluent investor base.
- Finally, 58% work full time and about one in five (19%) are business owners.
Editor’s note: Julia Johnston-Ketterer is (Senior Product Director) of Market Strategies International. This is an edited version of a post that originally appeared here on January 4, 2016.
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