US robo-advice market to exceed $400bn by 2020

A report from the US-based firm – titled Retail Direct Firms and Digital Advice Providers 2015: Addressing Millennials, the Mass Market, and Robo Advice – has projected the digital advice market will grow to $489 billion in assets under management by 2020.

According to Cerulli Associates director Tom O'Shea, this growth will be fuelled by the "compelling value proposition" of digital advice providers coupled with consumers' "expanding interests in passive investing".

"In addition, we anticipate that most, if not all, retail direct firms will have a digital advice offering within the next three years, and traditional advisers will also launch digital offerings for lower-balance investor accounts," he said.

Mr O'Shea added that many top digital advice providers which are considered to be "robos" are augmenting their delivery of advice with access to people through a toll-free phone number and chat system.

"With retail direct firms adding digital advice solutions, and digital advisers using service representatives to support online advice, the two channels are converging," he said.

"Both types of providers are moving toward a model that combines online advice with human support.

"To be successful, digital advisers will need to develop a strategy that incorporates the human element into their service model," Mr O'Shea said.

"Most consumers want to know that they can reach out to a person to solve a problem with their finances should the need arise."