It was four years ago that Schwab and Vanguard stepped into the robo-advisory market and leapfrogged the standalone top US robo advisors, Betterment, Wealthfront, and Personal Capital. SigFig was also a big contender at the time but has pivoted since into a predominately B2B business.
Anyone interested in reviewing the baby steps in grabbing market share and luring those holding cash to invest, can review a series of past posts[1]. Fintech startups and incumbents with low-cost investment asset allocation services, great customer onboarding, and relatively simple investment choices; have been trying to serve Unadvised Assets.
Current market snapshot
The top five robo advisors by AUM are 3 Fintechs and two incumbents. They have accumulated over $187 billion in AUM.
Source: Robo-advisors With the Most Assets Under Management -2019
The growth has been double-digit, the kind that VCs like. Despite the fact that robo-advisors have clearly not lowered the customer acquisition cost (CAC) and ironically, in most cases have been deploying the same old-fashioned channels to acquire customers[2]; VCs have been generous in funding them. Just for the top three Fintech robo-advisors, Betterment, Wealthfront, and Personal Capital VCs have invested ($275, $204, $265) nearly $745million.
The market share (as measured by AUM) amongst the top 5 US robos, is 20%-80% between Fintechs and incumbents.
One of the metrics that I had chosen to follow from the very beginning of the robo-advisory trend, was Unadvised Assets – cash in physical wallets and in checking & savings accounts. For me, Unadvised Assets are a measure of the market opportunity for robo businesses. Deloitte reported in 2014 that in the US there were close to 13 trillion of such, unadvised assets.
Looking at the Q3 2018 U.S. Federal Reserve report[3] and recent Money data, from grandmothers to hedge funds holding cash, in overnight money market funds, to checking accounts and currency; I realize that
Robo-advisors have had none or negligible impact on Unadvised assets.
In the US, Unadvised assets continue their solid growth. In 2016, I had reported $13.4trillion and now we are looking at $14.5trillion. An 8+% growth over the past 3yrs.
Unadvised assets in the Euro area, have grown from a total of 10.3 trillion EUR to 11.8 trillion EUR – a 14+% growth over the past 3yrs.
In the UK, from 1.56trillion GBP to 2.4 trillion GBP – a 5+% growth over the past 3yrs.
Cash continues to be up for grabs, for robo-advisors, for P2P lenders, for crowdfunding platforms, and tokenization platforms.
When will Unadvised Assets shrink? Will the digitization of capital markets (with the rich variety of technologies and business models) overtake the trends in fiat monetary policy, public markets, and human behavioral psychology?
[1]Nov. 2015 Salivating for Unadvised assets: a videographic
March 2016 Digital Wealth management: a videographic update
Nov. 2016 Oh, the things you could do with the enormous Cash pile!
[2] Advertising, mailing services, cheap initial offers….
[3]https://www.federalreserve.gov/releases/z1/20181206/z1.pdf
Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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