Don't miss out! Join us at
2024 featuring Fraud Fight Club on April 25th
arrow icon

How Robo-Advisory Firms Performed During the Pandemic

Post by:
March 10, 2021
Post by:
No items found.
March 10, 2021
How Robo-Advisory Firms Performed During the Pandemic

The COVID-19 pandemic pushed almost every industry to look at things differently, including financial services. While some industries suffered more than others, such as the airline and hospitality industries, several thrived mostly because of their technology preparedness. This readiness made it possible for businesses to continue operations under lockdown despite limited physical interactions. 

It’s not just businesses that found a way around technology; individuals—older and newer generations—found it too. Customers are now turning to newer and improved digital solutions. The rise of robo-advisory in financial services is one such instance. Robo-advisory services are offered via digital platforms, which follow through automated, algorithm-driven financial planning services with little or no manual supervision.

Rise of Robo-Advisory Firms

Robo-advisory services have grown significantly during the pandemic, with an average rise of 3.1% in accounts. The Vanguard Group has surged 14% in Assets Under Management (AUM), with upwards of a 35% increase in the number of customers. PensionBee and AJ Bell Youinvest have surged 14% and 13%, respectively, in AUM.

Robo-advisory, though, is not an entirely new concept. Fund managers have been using automated portfolio allocation software for a long time. However, it has become mainstream primarily because of the technological capacity to scale up services and the ability to offer it on a case-to-case or customized basis. It is also recognized as a low-cost alternative to traditional financial advisory services that charge exorbitant fees based on a planners’ experience, past performance, and pedigree. 

Further, the pandemic has led to a downswing in equity prices, leading to a prolonged bear market—an ideal time for bargain hunters. As a result, many people are trooping into equity markets, and a big chunk ends up signing for robo-advisors. As most new entrants to the market lack the sophistication of hedge fund managers and other titans of the investment industry, such as Warren Buffet, their best bet is to find a service that collects their financial information, analyzes, and then invests depending on their risk appetite. 

Robo-advisory services make decisions based on hard data and real-time statistics, which would reduce the error of human judgment. These advisors also provide constant and real-time revaluations based on prevailing economic conditions as opposed to quarterly reports published by traditional investment management companies. 

What Does the Future Hold for Robo-Advisory Firms? 

Critics of robo-advisory firms cite the lack of personal support to clients as one of the major shortcomings. In spite of that, the industry continues to grow. It hit an estimated $1.4 trillion in AUM at the end of 2020. It is projected to reach $2.4 trillion and 147 million users by 2023. The US accounts for 75% of the entire robo-advisory industry (a legacy of the 2008 financial crisis) and is home to some of the largest players operating in the global market, including Betterment, Wealthfront, Personal Capital, Nutmeg, FutureAdvisor, and The Vanguard Group. The US accounted for $1 trillion in transactions in 2020, followed by China (a distant second) with $300 billion in transactions and the UK and Germany at $24 billion and $13 billion, respectively.

The post-pandemic outlook is promising with hybrid robo-advisory. This service offers financial planning and guidance by typically combining a professionally managed account with the help of a robo-advisory service. Hybrid robo-advisory is projected to grow at a rapid pace. Financial advisors that incorporated digital tools registered a 77% increase in client retention, according to Refinitiv. However, the possible deterrent to the rapid adoption of robo-advisors can be the underdeveloped capital market and its chaotic data handling systems and regulatory regimes.

To learn about Prove’s identity solutions and how to accelerate revenue while mitigating fraud, schedule a demo today.

Create secure frictionless customer experiences using modern identity solutions

Join over 1,000 businesses that rely on Prove across multiple industries, including banking, FinTech, healthcare, insurance, and e-commerce. Contact us today.

Prove: the world’s most accurate identity verification and authentication platform

Trusted by 1,000+ leading companies to reduce fraud and improve consumer experiences. Contact us today to learn how you can frictionlessly secure your digital consumer journey — from onboarding to ongoing transactions.

Keep Reading...Read our latest white-paper on this subject!

Tap the button below to read our latest white-paper on the subject as industry leaders.

Accelerate your onboarding

Contact us to learn how leading companies are using Prove Pre-Fill to modernize the account creation process by shaving off clicks and keystrokes that kill conversion.

Create frictionless customer experiences

Get in touch to find out how we can help you identify your customers at every stage of their journey and offer them seamless and secure experiences.

Schedule a demo

Let our expert team guide you through our identity verification and authentication solutions. Select a date and time that works for you.

Schedule a demo

Find out how we can help you deliver seamless and secure customer experiences that comply with PSD2/SCA. Select a date and time that works for you.

Interested in more information about Prove Pre-Fill?

Download the Report

Download Aite-Novarica Group’s full report about Prove Pre-Fill, including a product overview, customer results, and how the product works.

Interested in more information about MFA?

Download the guide now to learn how you can improve security, cut down on fraud, and create the best possible customer experience.