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Robo-advice forecast to be bigger than BlackRock

Robo-advice forecast to be bigger than BlackRock

Money managed by so-called robo-advisers will outstrip the sums run by the world's current biggest asset manager in less than a generation, according to a Big Four accountancy firm.

The prediction features in a whitepaper published by Deloitte and Swiss banking software company Avaloq.

By 2020 it forecasts that the robo-advice market will account for between $2.2trn (£1.6trn) and $3.7trn (£2.7trn) of assets under management, rising to $16trn (£12trn) by 2025 – a larger AUM than BlackRock, generally considered to be the world's largest fund house by assets managed.

But the report also highlighted how this represents less than 1 per cent of private banking and wealth management AUM and could rise to 3 per cent by 2020 so most wealth will remain managed through a traditional approach globally.

The paper also highlighted that advisers need to match their use of these burgeoning technologies to their firm's own particular strategy.

It identified three emerging models of robo-advice with different target markets and their expectations.

While retail investors are sensitive to cost and look for fully automated robo-advice, mass affluent investors generally prefer to combine digital advice with human interaction.

High-net worth individuals, on the other hand, expect to have a personal relationship with their wealth manager and are less inclined to want a digital service.

Steve Hauman, partner at Deloitte Luxembourg, said: “More and more wealth managers are investing in new technology and improve their digital offering to match their customer’s expectations.

“What is important to bear in mind, however, is that a digital solution is as much about strategy that it is about technology.

“Without a clear strategy, the investment may not give the desired result.”

The paper found there are currently more than 100 robo-advisers in 15 countries.

Thibaut Jacquet-Lagrèze, head of group marketing at Avaloq, said: “Technology enables multiple models of wealth advisory, and digital offerings play a crucial part when banks want to serve new markets.

“It is important to note, though, that a shift to technology-based solutions also requires a change in the company culture for a seamless client experience.”