The WEALTHTECH Book

Ten Reasons Why Digital Wealth Management Will Become a Worldwide Market Standard

By Michael Mellinghof

Managing Director, TechFluence UK

Currently, digital wealth managers worldwide manage an estimated $130bn, approximately 70% of it in the USA and almost half of it by just one market participant: Vanguard. Compared with the $60trn of assets under management in the wealth management industry globally (estimates by TechFluence), this 2017 figure is incredibly small, almost negligible – so far, at least!

However, the growth picture is strong, with realized annual growth rates of +50% in some cases and an expected market size of robo-advice providers between $489bn in assets under management by end 2020 (estimate by Cerulli¹) or $2.2trn by 2020 (by A. T. Kearney²).

TechFluence expects the number of robo-advice product offerings to rise significantly to around 500 in five years’ time – in Europe alone. As of May 2017, there are 73 robo-advice providers in the market in Europe³; if you include automated product offerings from incumbents, this number exceeds 120.

What are the drivers for these market expectations and this significant change to an industry that has been going on almost without significant structural change for decades? The following reasons are all relevant and their combined impact is fuelling the change in the worldwide asset and wealth management industry:

1. Low interest rate environment. With an almost zero interest rate environment in the majority of global capital ...