Robo-Advisor Revenue to Reach $25B by 2022: Juniper Research

January 3, 2018 — 3:40 PM EST

The robo-advisor market is poised to grow substantially in the next five years, with Juniper Research predicting that it will be a $25 billion market by 2022. That's up from $1.7 billion in 2017.

In a new report, the market research firm said that robo-advisors are making investing more "compelling" for both high-net-worth individuals and lower-income investors thanks in part to low fees and the ease in which investments can be made. According to Juniper, the average fees on a robo-advisory platform will be as low as 0.6% of assets under management by 2022.

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Driving the interest and thus the growth is a push on the part of the robo-advisors to meet the needs of the wealth management market by launching smartphone apps that make it more convenient to invest and giving millennials reasons to get into the market. As a result, Juniper said that total assets under management will increase for the industry to $4.1 trillion in 2022 from $330 billion in 2017. "The technologies powering robo-advisors will mature to such an extent that they move from their current human supervised role to being utilized in a fully automated way. This will be aided by track records of performance automated robo-advisor systems are establishing," wrote author Nick Maynard in a press release highlighting the new research.  

While the robo-advisor market is seeing a lot of new entrants, Juniper said the traditional wealth management companies that are adopting technology stand to benefit as well. That is good news for The Charles Schwab Corporation (SCHW), the San Francisco-based discount brokerage that has been doing brisk business with its robo-advisory service. Schwab Intelligent Portfolio was the best performing robo-advisor in the third quarter, with its model portfolio for taxable accounts outperforming similar portfolios of 19 other robo-advisors, according to analysis by Backend Benchmarking. (Check out how Schwab stacks up compared to peers with the Charles Schwab review.)

Backend Benchmarking publishes "The Robo Report," which tracks the performance of the leading robo-advisors each quarter, looking at how these computer-generated advisors perform when advising high-tax-bracket stock/bond portfolio investors. It found that Schwab's model portfolio for taxable accounts gained 3.97% during the three months that ended in September. Betterment, the competing robo-advisor, was in second place, followed by SigFig and SoFi, which were tied for third place. For one year, SigFig and SoFi were in the lead with returns of 11.97%, while Schwab was right behind them with 11.93% returns. For two years, Schwab's returns are 25.94%, compared with the Betterment portfolio's returns of 21.89%, Backend Benchmarking found.