Americans invested an average of $70,000 via robo advisors last year, 5x more than the European market and 9x more than Chinese market
New research from AltIdex.com reveals last year, Americans invested an average of $69,174 via robo-advisors. The European market saw one-fifth of that value, with $12,931 in average assets under the management (AUM) per user. Chinese market was far behind with an average AUM per user of $7,552. View complete findings and statistics here.
Over the past six years, roughly 180 million people have started using robo-advisors to build trading strategies, buy stocks, and grow their portfolios. Nearly one-fifth were from the United States, the world’s largest robo-advisors market. Although these digital investment managers have seen their popularity grow worldwide, Americans invested much more money via robo-advisors than any other nation.
According to data presented by AltIdex.com, Americans invested an average of $70,000 via robo-advisors last year, five times more than Europeans and nine times more than Chinese.
Average AUM per User in the US Robo Advisors Market to Hit Over $116,000
Before robo-advisors, investing money in the stock market was mainly reserved for those who could afford to hire an expert to guide them or had the expertise to do it themselves. But thanks to these platforms, people can now invest in stocks without actively managing their portfolios, with algorithms adjusting their risk preferences, making data-driven decisions, and maximizing returns. This easier way of trading with lower fees has drawn millions of people to the market.
According to a Statista survey, the total value of assets under the management of robo-advisors surged by 1,190% between 2017 and 2022, jumping from $187bn to $2.45trn worldwide. Most of that impressive growth came from the US market, which saw more investments via robo-advisors than any other country.
Last year, Americans invested an average of $69,174 via robo-advisors. The European market saw one-fifth of that value, with $12,931 in average assets under the management (AUM) per user. Chinese market was far behind with an average AUM per user of $7,552.
Statista expects Americans to continue using robo-advisors to grow their portfolios, with the average AUM per user surging by almost 70% and reaching over $116,000 by 2027. The European market will see a 55% growth in this period, with the average AUM per user rising to $19,890 in the next four years. Due to regulatory restrictions imposed on robo-advisory services, China’s growth is set to plummet from 2022 onward. According to Statista, the average AUM per user in the Chinese market will drop by 40% to $4,461 in the next four years.
US Leads in Average AUM, but Europe to See the Biggest User Growth
Although the US market will see more investments in the robo-advisors segment, Europe leads in total user count. Last year, roughly 30 million Americans used robo-advisors to grow their assets. Statista expects another 20 million people in the US to start using their services in the next four years, pushing the total user count to nearly 50 million.
The European market is forecasted to see 61.7 million users by 2027, up from 43.87 million in 2022. On the other hand, regulatory restrictions will significantly cut down the user count in the Chinese market, with the number of people using robo-advisors plunging from 54.1 million in 2022 to only 520,000 in 2027.
Overall, Statista expects more than 230 million worldwide to start using robo-advisors in the next four years.
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FAQs
The main con of Wealthfront is that its required $500 minimum deposit is higher than other free robo-advisors like SoFi Invest® and Betterment Investing.
Are robo-advisor fees worth it? ›
“The biggest advantage they provide is low cost. You can have your portfolio managed for a very low management fee compared to the average rate of an advisor that typically charges 1% or more to invest [your] money.
Are robo-advisors good for retirees? ›
A robo-advisor can help ease the burden of managing your portfolio as you transition to retirement—and help you figure out how to tap your assets in tax-smart ways.
What are two cons negatives to using a robo-advisor? ›
The generic cons of Robo Advisors are that they don't offer many options for investor flexibility. They tend to not follow traditional advisory services, since there is a lack of human interaction.
What happens if Wealthfront goes under? ›
Wealthfront Brokerage is a member of SIPC, which insures Cash Balances swept into Money Market Funds as follows: Customers are protected up to the applicable SIPC limits if Wealthfront Brokerage were to go out of business and there were customer securities or funds unaccounted for.
How safe is my money at Wealthfront? ›
Your cash is insured by the Federal Deposit Insurance Corporation (FDIC). This coverage protects your cash in the event that a bank goes out of business. Wealthfront uses multiple partner banks to ensure FDIC coverage of up to $8 million for your cash deposits.
Are robo-advisors beating the market? ›
Do robo-advisors outperform the S&P 500? Robo-advisors can outperform the S&P 500 or they can underperform it. It depends on the timing and what they have you invested in. Many robo-advisors will put a percentage of your portfolio in an index fund or a variety of funds intended to track the S&P 500.
What is the average return on a robo-advisor? ›
Robo-advisor performance is one way to understand the value of digital advice. Learn how fees, enhanced features, and investment options can also be key considerations. Five-year returns from most robo-advisors range from 2%–5% per year.
Can robo-advisors lose money? ›
Robo-advisors, like human advisors, cannot guarantee profits or protect entirely against losses, especially during market downturns—even with well-diversified portfolios. Because most robo-advisors only take long positions, when those assets fall in value, so will the portfolio it has constructed.
Which bank has the best robo-advisor? ›
If you're in the market for a robo-advisor, there are plenty of providers to choose from — but important factors like fees, investment portfolios, account minimums and other features can vary widely. In our analysis, the two robo-advisors with the top scores are Wealthfront and Betterment.
On the surface, robo-advising is just as safe as working with a human financial advisor. A robo-advisor's platform may include biases or errors that prevent it from achieving the best investment returns, but then again, humans are also subject to mistakes.
Why robo-advisors failed? ›
Robo-advisors in the U.S. have faced three main challenges: high client acquisition costs, ongoing costs of servicing clients, and low revenue yield on client assets.
Do robo-advisors beat human advisors? ›
If you require a high level of personalized service and direct management of your investments, a traditional human advisor might be better suited to your needs. Conversely, if cost and simplicity are your primary concerns, a robo-advisor might be the better choice.
Is robo-advisor better than trading? ›
Robo-advisors provide customized advice to help you optimize your investments, whereas self-directed brokerage accounts give you full control over your portfolio. People looking for low-cost professional advice or low-involvement investing success may benefit from the services of a robo-advisor.
Does Wealthfront have hidden fees? ›
* Wealthfront does not charge any account-opening fees, withdrawal or account-closing fees, trading/commission fees, or account transfer fees.
What is the deal with Wealthfront? ›
Wealthfront offers individual and joint non-retirement accounts; Roth, traditional, rollover and SEP IRAs; 529 college savings plans; and high-yield cash accounts. The inclusion of 529 plans is rare among robo-advisors, making Wealthfront a good choice for those saving for college.
Is it safe to link bank accounts to Wealthfront? ›
Your security is important to us. We use bank-level security to keep your account safe. Linking does not allow Wealthfront to manage or transfer assets in your linked account.
Is it easy to withdraw from Wealthfront? ›
To transfer funds out, select Withdraw. For Wealthfront investment accounts, each deposit can be a minimum of $100 and each withdrawal a minimum of $250. For Wealthfront cash accounts, you can deposit and withdraw a minimum of $1. Transfer maximums vary by transfer type, and can be found in this FAQ.
