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Cerulli Sees 2,500% Jump in Robo Assets in Next 5 Years

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It’s no secret that robo-advisors have been adding assets under management at a brisk pace. Betterment on Wednesday reported that its assets tripled during the first ten months of this year to $3 billion. But that 200% growth rate is piddling compared to what Cerulli Associates is projecting for the entire robo-advisor industry.  In a report released Wednesday the research firm projected a 2,500% jump in robo assets by 2020, to $489 billion.

“The compelling value proposition of digital advice providers (or robo-advisors), who offer low-minimum, low-cost portfolios, coupled with consumers’ expanding interest in passive investing will fuel this growth,” said Tom O’Shea, associate director at Cerulli, in a press release.

Cerulli expects that the growth of robo-advisor assets will be broad-based, coming not just from robo-only advisors and large retail firms like Schwab that currently offer digital advisory services but from other retail firms as well as traditional advisory firms.

“We anticipate that most, if not all, retail direct firms will have a digital advice offering within the next three years, and traditional advisors will also launch digital offering for lower-balance investor accounts,” said O’Shea.  But he noted that “large retail direct firms will be one of the major drivers of growth for digital advice.”

In the long run, Shea sees a convergence between the robo-only and traditional human-centric advisors. “With retail direct firms adding digital advice solutions, and digital advisors using service representatives to support online advice, the two channels are converging,” said Shea. “ Both types of providers are moving toward a model that combines online advice with human support.”

Although Cerulli notes, not surprisingly, that millennials are more likely than older investors to use a digital advisor the firm recommends that all digital advisors target Gen Xers and baby boomers. Those investors not only have more assets than millennials but about 30% of them are willing to work with an online-only advisor.

Indeed, Betterment’s latest numbers bear this out. Thirty percent of its business now comes from investors 50 or older. The average customer is 36, and more than three-quarters of client interactions occur on mobile phones, including those with the 50-and-over crowd.

— Check out 5 Predictions About the Future of Robo-Advisors: Silver Lane on ThinkAdvisor.