What is Robo Advisory?

• Automated online portfolio management of

private assets
• Financial advisory based on smart algorithms,
lead investors or swarm intelligence (social
trading)
• Notable robo-advisors, e.g. Betterment,
Wealthfront, Scalable Capital
 Robo Advisory in India
• Assets under Manegement in the "Robo-Advisors" segment
amounts to US$20m in 2018.
• Assets under Management are expected to show an
annual growth rate (CAGR 2018-2022) of 54.4 % resulting in
the total amount of US$116m in 2022.
• In the "Robo-Advisors" segment, the number of users is
expected to amount to 0.2m by 2022.
• The average assets under management per user in the
"Robo-Advisors" segment amounts to US$483.40 in 2018.
• From a global comparison perspective it is shown that the
highest assets under management is reached in the United
States (US$266,190m in 2018).
 Robo Advisory in USA
• Assets under Manegement in the "Robo-Advisors" segment
amounts to US$266,190m in 2018.
• Assets under Management are expected to show an
annual growth rate (CAGR 2018-2022) of 21.3 % resulting in
the total amount of US$576,449m in 2022.
• In the "Robo-Advisors" segment, the number of users is
expected to amount to 12.7m by 2022.
• The average assets under management per user in the
"Robo-Advisors" segment amounts to US$40,420.17 in
2018.
• From a global comparison perspective it is shown that the
highest assets under management is reached in the United
States (US$266,190m in 2018).
 Highlights
worldwide
• Assets under Manegement in the "Robo-Advisors"
segment amounts to US$373,945m in 2018.
• Assets under Management are expected to show an
annual growth rate (CAGR 2018-2022) of 37.9 %
resulting in the total amount of US$1,353,268m in
2022.
• In the "Robo-Advisors" segment, the number of users
is expected to amount to 121.7m by 2022.
• The average assets under management per user in the
"Robo-Advisors" segment amounts to US$14,506.48 in
2018.
 Wealth Management
• Automation shift to a hybrid model The asset and wealth
management industry is witnessing a wave of automation
globally.
• While robo-advisory based services have been present in
western economies for some time now, players in the
segment are still refining their operating and business
models.
• Globally, we are seeing a shift from robo-advisory to hybrid
human-assisted robo-advisory or vice versa. There are two
main reasons driving this shift, consumer perceptions and
technological barriers.
• While technologies like AI and ML have improved vastly
over the past 2 years, they still cannot compete with the
ability to contextualise and respond as well as human
advisors.
Robo Advisory Adoption ( Globally)
• Robo-advisory adoption The current market share of
robo-advisory firms is marginal.

• However, several research studies forecast that robo-

advisors are going to witness significant growth going
forward making quality financial advice available across
demographics at an affordable cost.

• Traditional advisors on the other hand can develop

their own robo-advisor platforms to capitalize on this
opportunity. However, in-house development has its
own risks such as a high cost of development and
cannibalization.
 Robo-advisory obstacles
• Lack of education Robo-advisors also face many
challenges in the Indian wealth management sector.
With the lack of widespread financial literacy in India,
many investors are not aware of the underlying
fundamentals of investing and risk management.
• Lack of personal touch This, combined with a lack of
personal touch from robo-advisors and their inability to
answer questions on par with human advisors,
hampers credibility and consumer trust in robo-
advisors.
• Lack of reliable data Besides the lack of trust from
investors, robo-advisors face another challenge in the
Indian wealth management sector, which is the lack of
reliable data to develop algorithms and execute a
financial plan to achieve the investor’s goals, while still
complying with the investor’s risk profile.
 Robo Advisory market globally

• To start with, robo-advisory made its debut in the US in early 2000.

• Given the low initial minimum investment, almost negligible
management fees and easy access,robo-advisory caught the fancy
of many tech-savvy small investors, who otherwise did not have
access to established financial advisors.
• The idea of robo-advisory became a hot cake in the US start-up
space because the development of wealth management software
was the only big investment required. Very soon, many companies
offering proprietary wealth management software cropped up, but
very few managed to thrive. Last year alone, venture capitalists
collectively poured in $300 million in various companies operating
in this space.
• Betterment, WealthFront, Personal Capital, Future
Advisor and SigFig are some of the names which are
ruling the roost in the online advisory space, globally.
• Thanks to their popularity and given the pace at which
assets under-management ballooned, robo-advisors
were soon perceived to give traditional advisors a run
for their money. Identifying the vast opportunity, many
from corporate America, such as Vanguard and Charles
Schwab, too, joined the party.

• According to global consulting firm A.T. Kearney, robo-

advisors are expected to become a $2 trillion industry
by 2020, up from around $20 billion till May 2015.
 Assets Under Management (AAUM)
stood at ₹ 23.25 Lakh Crore (INR
•
23.25 Trillion)
Average Assets Under Management (AAUM) of Indian Mutual Fund Industry for
the month of January 2018 stood at ₹ 23.25 lakh crore. Assets Under
Management (AUM) as on January 31, 2018 stood at ₹ 22.41 lakh crore.
• The AUM of the Indian MF Industry has grown from ₹ 3.26 trillion as on 31st
March 2007 to ₹22.41 trillion as on 31st January, 2018, about six and half fold
increase in a span of about 10 and half years!!
• The MF Industry’s AUM has grown from ₹5.87 trillion as on 31st March, 2012 to ₹
22.41 trillion as on 31st January, 2018, about three and half fold increase in a span
of about 5 and half years !!
• The Industry’s AUM had crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for
the first time in May 2014 and in a short span of about three and half years, the
AUM size has increased more than two folds and stood at ₹22.41 Trillion (₹22.41
Lakh Crore) as on 31st January, 2018.
• The total number of accounts (or folios as per mutual fund parlance) as on
January 31, 2018 stood at 6.83 crore (68.3 million), while the number of folios
under Equity, ELSS and Balanced schemes, wherein the maximum investment is
from retail segment stood at 5.65 crore (56.5 million).