Americans invested an average of $70,000 via robo advisors last year, 5x more than the European market and 9x more than Chinese market
New research from AltIdex.com reveals last year, Americans invested an average of $69,174 via robo-advisors. The European market saw one-fifth of that value, with $12,931 in average assets under the management (AUM) per user. Chinese market was far behind with an average AUM per user of $7,552. View complete findings and statistics here.
Over the past six years, roughly 180 million people have started using robo-advisors to build trading strategies, buy stocks, and grow their portfolios. Nearly one-fifth were from the United States, the world’s largest robo-advisors market. Although these digital investment managers have seen their popularity grow worldwide, Americans invested much more money via robo-advisors than any other nation.
According to data presented by AltIdex.com, Americans invested an average of $70,000 via robo-advisors last year, five times more than Europeans and nine times more than Chinese.
Average AUM per User in the US Robo Advisors Market to Hit Over $116,000
Before robo-advisors, investing money in the stock market was mainly reserved for those who could afford to hire an expert to guide them or had the expertise to do it themselves. But thanks to these platforms, people can now invest in stocks without actively managing their portfolios, with algorithms adjusting their risk preferences, making data-driven decisions, and maximizing returns. This easier way of trading with lower fees has drawn millions of people to the market.
According to a Statista survey, the total value of assets under the management of robo-advisors surged by 1,190% between 2017 and 2022, jumping from $187bn to $2.45trn worldwide. Most of that impressive growth came from the US market, which saw more investments via robo-advisors than any other country.
Last year, Americans invested an average of $69,174 via robo-advisors. The European market saw one-fifth of that value, with $12,931 in average assets under the management (AUM) per user. Chinese market was far behind with an average AUM per user of $7,552.
Statista expects Americans to continue using robo-advisors to grow their portfolios, with the average AUM per user surging by almost 70% and reaching over $116,000 by 2027. The European market will see a 55% growth in this period, with the average AUM per user rising to $19,890 in the next four years. Due to regulatory restrictions imposed on robo-advisory services, China’s growth is set to plummet from 2022 onward. According to Statista, the average AUM per user in the Chinese market will drop by 40% to $4,461 in the next four years.
US Leads in Average AUM, but Europe to See the Biggest User Growth
Although the US market will see more investments in the robo-advisors segment, Europe leads in total user count. Last year, roughly 30 million Americans used robo-advisors to grow their assets. Statista expects another 20 million people in the US to start using their services in the next four years, pushing the total user count to nearly 50 million.
The European market is forecasted to see 61.7 million users by 2027, up from 43.87 million in 2022. On the other hand, regulatory restrictions will significantly cut down the user count in the Chinese market, with the number of people using robo-advisors plunging from 54.1 million in 2022 to only 520,000 in 2027.
Overall, Statista expects more than 230 million worldwide to start using robo-advisors in the next four years.
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FAQs
The Genesis of Robo-Advisors
When did robo-advising start? ›
The first robo-advisor Wealthfront (formerly known as KaChing) was launched in 2008. Thereafter, robo-advisors increased in popularity. The first robo-advisers were used as online interfaces by financial managers to manage and balance clients' assets.
What is the rise of the robo-advisors? ›
In the fast-paced world of finance, the integration of technology and investment strategies has led to the emergence of a revolutionary tool: robo-advisors. These AI-driven platforms are changing the investment landscape, offering personalized, efficient, and cost-effective financial advice.
Why are robo-advisors becoming more popular? ›
The appeal of robo-advisors is undeniable. Here are some of the key factors driving their growth: Accessibility: Forget minimum investment requirements or hefty fees. Robo-advisors often have low minimums and charge significantly lower fees than traditional advisors, making investing accessible to everyone.
What is the historical return of the robo-advisor? ›
Five-year returns from most robo-advisors range from 2%–5% per year. * And the performance of these automated investment services can vary based on asset allocation, market conditions, and other factors.
What is the biggest downfall of robo-advisors? ›
Limited Flexibility. Most robo-advisors won't be able to help you if you want to sell call options on an existing portfolio or buy individual stocks. There are sound investment strategies that go beyond an investing algorithm.
Do millionaires use robo-advisors? ›
According to Spectrem, on a scale of 1 to 100 (1 being low and 100 being high), wealthy investors rated their knowledge of robo advisers at 15.47, and only 6% said they have ever used one.
Who is the target market for robo-advisors? ›
Individuals with financial literacy if advanced are more likely to be interested in robo-advisors. Financial online activities are predictive of being potential users of robo-advisors. Non-financial online activities are not associated with the interest in robo-advisors.
Do robo-advisors beat human advisors? ›
The type of advisor that is better for you depends on what your financial needs are. For core investing and planning advice, a robo-advisor is a great solution because it automates much of the work that a human advisor does. And it charges less for doing so – potential savings for you.
How many Americans use robo-advisors? ›
The latest MagnifyMoney study of nearly 1,600 Americans finds that 63% of consumers are open to using a robo-advisor to manage their investments, with millennials being the most open (75%). That said, only 41% of Americans with investments use a financial advisor — and just 1% say they use a robo-advisor.
The generic cons of Robo Advisors are that they don't offer many options for investor flexibility. They tend to not follow traditional advisory services, since there is a lack of human interaction.
What is the future of the robo-advisor? ›
Robo-advisors will need advanced technologies to improve their algorithms, drive more personalization in their offerings for millennials/ Gen Z investors. They need to involve human advisory at higher portfolio thresholds and expand distribution through Robo-for-advisor solutions.
Who benefits from robo-advising? ›
Across all investors, robo-advising reduces idiosyncratic risk by lowering the holdings of individual stocks and active mutual funds and raising exposure to low-cost indexed mutual funds.
Are robo-advisors beating the market? ›
Do robo-advisors outperform the S&P 500? Robo-advisors can outperform the S&P 500 or they can underperform it. It depends on the timing and what they have you invested in. Many robo-advisors will put a percentage of your portfolio in an index fund or a variety of funds intended to track the S&P 500.
When did robo-advisors become popular? ›
Early Innovators and the First Generation of Robo Advisors
Betterment and Wealthfront were the first platforms to hit the market, launching in 2008 and 2011. These companies became synonymous with the robo-advising movement, attracting significant investment and user growth.
How big is the market for robo-advisors? ›
Robo Advisory Market Insights
Global Robo Advisory Market size was valued at USD 4.13 billion in 2021 and is poised to grow from USD 5.22 billion in 2022 to USD 41.83 billion by 2030, growing at a CAGR of 29.7% in the forecast period (2023-2030).
When was Robo created? ›
The World's First Industrial Robot Born in the United States
The world's first industrial robot was brought to life in the United States in 1962. The idea of the industrial robot was born from American engineer, George Charles Devol, Jr. in 1954.
Will robo-advisors replace financial advisors? ›
So, have robo-advisors effectively replaced financial advisors? The short answer is no. Robo-advisors are valuable tools, even to the point that some financial advisors use them. However, one of the advantages technology grants humans is the ability to focus on more significant, specialized tasks.
