Robo-advice to take center stage during COVID-19 crisis, says GlobalData

Robo-advice is increasing among all age groups, according to a survey by GlobalData*. In the US, the number of baby boomers using a robo-advisor rose from 7.2% in 2019 to 7.8% in 2020. On the other end of the age spectrum, in 2019 only 13.6% of Generation Z used robo-advisors, but 16.4% are users in 2020. Appetite for digital investment platforms is clearly on the rise. Furthermore, the COVID-19 crisis is expected to prove that these electronic advisors can successfully navigate an economic downturn.

Sergel Woldemichael, Wealth Management Analyst at GlobalData, commented: “The COVID-19 pandemic has put the spotlight on all things digital. For example, Wealthfromt saw account openings rose 68% during the crisis, while, from a returns perspective, Wealthsimple’s mutual funds have outperformed traditional Canadian funds. Meanwhile, traditional players are seeing significant reductions in assets under management and are playing catchup in terms of utilizing technology to keep their business alive.”

Although robo-advisors can benefit from being digital by nature at a time when human interaction is limited, that will not be enough. Market crashes demand high levels of communication between investors and advisors, as clients want to know their wealth is safe. This means purely automated robo-advisors should incorporate a human element into their proposition in order to encourage retention.

Woldemichael continues: “Lockdown measures have accelerated the wealth management industry’s shift to digital, much to the benefit of robo-advice – a concept that respects social distancing by nature. Although the full damage of the current global downturn is yet to be seen, if digital players can remain adaptive, keep in continuous communication with their clients and protect their clients’ wealth, then they should be able to pass their biggest test.”

* GlobalData’s 2020 Banking and Payments Survey

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