Robo-advisors are now the preferred investment provider of 4 per cent of the UK’s mass affluent population, compared to only 1.3 per cent in 2018 and traditional players need to take notice to avoid losing clients to automated investment services, according to data and analytics company GlobalData.
Robo-advisors provide financial advice online with minimal to moderate human intervention. Their rise in popularity is a result of players in the space continually expanding their propositions to meet consumer needs.
Sergel Woldemichael, Wealth Management Analyst at GlobalData, says: “While 4 per cent remains small in comparison to other channels, it is a stark improvement on 2018. Robo-advisors are evidently holding on to consumers more than ever before.”
Robo-advisors have been around for almost a decade now, and for most of this time were purely meeting the digital needs of investors. However, over the past 12 months, automated investment platforms have upped their game.
Woldemichael explains: “Players such as Nutmeg introduced human advice as part of their proposition in 2018 in response to consumer demand, giving investors the best of both worlds and the likes of Moneybox and Wealthsimple have been able to capitalise on the rise in demand for socially responsibly investments, introducing sustainable options to their core propositions. In addition, Wahed Invest has also carved out a niche by targeting the UK’s sizeable Muslim community to become one of the first digital investment platform to solely invest in Sharia-compliant companies in 2018.”
Robo-advisors still have a long way to go, as the vast majority of investors still use more traditional channels. However, automated services are clearly making a mark, with usage increasing year on year in the UK.
Woldemichael concludes: “By meeting more than just the digital needs of consumers, these platforms are clearly aiming for longevity. Robo-advisors are yet to prove they can bring better returns than traditional channels, but incumbents cannot afford to ignore the rise in demand for automated investment services.”