What Is A Robo-Advisor?

The term “Robo-Advisor,” also known as “Automated Investment Advisory Service,” refers to the use of algorithms, artificial intelligence, and other technologies to provide investors with automated, personalized, and low-cost portfolio management services.

Robo-Advisor typically employs sophisticated algorithms and models, combined with questionnaires to further understand investors’ investment objectives, investment period, risk tolerance, etc. With minimal or no human intervention, it assists investors in asset allocation and risk control. In cases where the actual investment deviates from the expected target allocation, a process called “rebalancing” is often used to realign the portfolio back to its target allocation.

Currently, the underlying holdings of Robo-Advisor are mainly based on mutual funds and ETFs. In contrast to traditional personal advisors, Robo-Advisors offer lower investment thresholds, reduced management fees, increased transparency, and more efficient portfolio management services.

Why Build a Robo-Advisor Platform?

Background

Following the 2008 financial crisis, several financial startups in the United States began exploring and developing Robo-Advisor platforms. The aim was to remove human intervention, which was linked to investment failures, and introduce a rational investment tool by leveraging new technologies.

One of the most representative companies is Betterment, founded in 2008.

Mainly investing in ETFs, with assets under management more than $36 billion and a user base of up to 800,000 people.

Compared with Traditional Personal Advisory Services, Robo-Advisors offer 4 Significant Advantages

Mitigate Emotional Impact on Investment Decisions

By employing algorithms, the Robo-Advisor eliminates personal emotional influences in investment decision-making. This helps investors make rational investment plans and achieve their objectives of stable asset growth.

Customized Services

Robo-Advisor utilizes algorithms based on information such as investment objectives, investment period, and risk tolerance to provide tailored investment portfolio recommendations that align with suitability and offer optimal risk-reward ratios.

Cost Savings on Personnel

Robo-Advisor offers a cost-effective solution by eliminating the need for manpower, consultants, office space, and equipment. Their ability to provide services 24/7 across different time zones allows service providers to capitalize on economies of scale.

Risk Alert and Rebalancing

Robo-Advisor includes a portfolio rebalancing feature. With investors’ approval, it can realign the portfolio to target allocation, providing a service edge compared to traditional investment advisors.

The Development of Robo-Advisors

The Global Assets Under Management, AUM
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2023 AUM ($USD)
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2027 AUM ($USD)
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CAGR , 2023-2027
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By 2027 Number of users

These forecasts are based on April 2023 estimates from Statista Market Insights, a foreign research institution.

The Market Estimates for Assets under Management in the Robo-Advisor Sector Vary by Country

2023 AUM ($USD) 2027 AUM ($USD) CAGR , 2023-2027 By 2027 Number of Users
United States $1,170 billion $2,020 billion 14.63 % 49.04 million
Germany $136.4 billion $204.4 billion 10.64 % 7.26 million
Russia $128.2 billion $210.1 billion 13.14 % 17.00 million
United Kingdom $127.6 billion $229.9 billion 15.86 % 8.72 million
Japan $99.54 billion $165.1 billion 13.48 % 7.58 million
Australia $59.94 billion $105.8 billion 15.26 % 2.96 million
South Korea $57.44 billion $80.23 billion 8.71 % 4.04 million
Singapore $17.56 billion $30.65 billion 14.94 % 0.8338 million
Hong Kong $8.95 billion $16.49 billion 16.51 % 0.5219 million
Thailand $27.23 billion $43.16 billion 12.20 % 3.66 million
Vietnam $7.56 billion $14.83 billion 18.35 % 2.96 million

These forecasts are based on April 2023 estimates from Statista Market Insights, a foreign research institution.

In Taiwan, the Financial Supervisory Commission (FSC) Opened Up the Robo-Advisor Business in June 2017

According to FSC statistics, by the end of 2018, the assets under management (AUM) in Robo-Advisors amounted to NT$570 million, with only two entities. As of the end of September 2023, the total AUM reached NT$7.552 billion (equivalent to USD 240 million), with over 170,000 users, and a total of 16 entities.

Although the AUM in the Robo-Advisor industry in Taiwan has seen annual growth ,

it currently represents less than 0.01% of the global Robo-Advisor market.
The disparity between Taiwan and countries like Japan, Singapore, South Korea, and Hong Kong is remarkable. In other words, there is considerable growth potential, and Taiwan has the opportunity to catch up in this market.

By 2023 AUM

The adoption of Robo-Advisor is an unstoppable trend, with plenty of companies firmly established for many years in Europe and the United States with remarkable success. For key players in the financial industry, the current consideration is not whether to deploy a Robo-Advisor platform but rather how to build up the platforms to effectively align with the prevailing trend. 

The adoption of Robo-Advisor is an unstoppable trend, with plenty of companies firmly established for many years in Europe and the United States with remarkable success. For key players in the financial industry, the current consideration is not whether to deploy a Robo-Advisor platform but rather how to build up the platforms to effectively align with the prevailing trend.