Robo-advisors could grow into a $7 trillion industry by 2025, accounting for up to 15 percent of all domestic assets under management for retail investors, a Deloitte consultant said Wednesday.
The robo-advisor sector will evolve from portfolio allocation and investment recommendations to holistic advice powered by advanced analytics, said Gauthier Vincent, Deloitte’s U.S. wealth management leader.
Robo-advice will appeal mostly to lower tier and mass affluent consumers with up to $800,000 in assets, he added.
However, Vincent said the wealthy may also want to put a piece of their worth in the hands of robo-advisors.
The challenges for robo firms to prosper will be to manage the cost of acquiring new customers, employing a price structure that will encourage customers to pay more because they’ll know they’re getting more, accessing funding and taking advantage of economies of scale through non-advisory operations, he said.
Vincent warned that thin margins and high marketing costs have the potential to doom some robo-advisors.