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Robo Use Rising, Helped by Millennials with Half a Million+ to Invest

By Alex Padalka November 11, 2020

The robo advice market is growing, helped in no small part by wealthy millennials, according to a recent report.

A recent survey by data analytics firm Hearts and Wallets found that only 8% of U.S households have some of their assets invested on a robo platform, RIA Backend Benchmarking writes.

“While the number is not groundbreaking, it is impressive for a service that barely existed 10 years ago,” Backend Benchmarking says.

Robinhood Financial's user numbers, for example, have risen significantly in recent months — from three million users in the first quarter to 13 million in August, as reported by The Financial Times.

Moreover, contrary to the common perception of robo advice as mostly appealing to less-affluent investors, close to half of millennials with more than $500,000 to invest are robo-advice customers, the company writes, citing a recent Fidelity report.

Another trend in the industry is incumbents, including Fidelity, Bank of America and Schwab, rolling out free financial planning tools designed to funnel prospects toward investment management, Backend Benchmarking writes.

“Providers see robo advice as a new way to engage with clients early on and then ramp up to full-service offerings as their wealth grows,” the company writes.

Backend Benchmarking found that the robo from Titan had the best short-term performance, outperforming its peers by 30.65% over the one-year period ending with the third quarter, according to the report, which tracks 88 accounts at 41 different digital advice providers. SigFig was the top overall performer over the four-year period, while Fidelity Go delivered the top four-year equity performance and Schwab showed top performance in fixed income, Backend Benchmarking found.

The company also says that socially responsible investing had better equity performance over the two-year period, even though the underlying funds typically come with higher fees.

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Tags:  Technology , Investment strategies , Portfolio management , Bank of America , Fidelity , Schwab

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