Robo-advisers were selected as the preferred investment provider by 4% of the UK's mass affluent population, compared to only 1.3% in 2018. Traditional players need to take notice to avoid losing clients to automated investment services, according to GlobalData, a financial data and analytics company.
Robo-advisers provide financial advice online with minimal to moderate human input. Their rise in popularity is a result of players in the space continually expanding their propositions to meet consumer needs.
Sergel Woldemichael, wealth management analyst at GlobalData, commented: "While 4% remains small in comparison to other channels, it is a stark improvement on 2018. Robo-advisers are evidently holding on to consumers more than ever before."
Robo-advisers are yet to prove they can bring better returns than traditional channels, but incumbents cannot afford to ignore the rise in demand for automated investment services."
Robo-advisers have been around for almost a decade now, and for most of this time were purely meeting the digital needs of investors. However, over the past 12 months, automated investment platforms have upped their game.
Woldemichael explained: "Players such as Nutmeg introduced human advice as part of their proposition in 2018 in response to consumer demand, giving investors the best of both worlds and the likes of Moneybox and Wealthsimple have been able to capitalize on the rise in demand for socially responsibly investments, introducing sustainable options to their core propositions.
"In addition, Wahed Invest has also carved out a niche by targeting the UK's sizable Muslim community to become one of the first digital investment platform to solely invest in Sharia-compliant companies in 2018."
Robo-advisers still have a long way to go, as the vast majority of investors still use more traditional channels. However, automated services are clearly making a mark, with usage increasing year on year in the UK.
Woldemichael concluded: "By meeting more than just the digital needs of consumers, these platforms are clearly aiming for longevity. Robo-advisers are yet to prove they can bring better returns than traditional channels, but incumbents cannot afford to ignore the rise in demand for automated investment services."
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