Fintech: The Impact of Robo-Advisory and Innovations (Riyadh Valley Company)

Summary

• The global robo-advisory assets under management (AuM) are projected to reach $2.76 trillion in 2023 and grow to $4.66 trillion by 2027.p.4
• In 2021, hybrid robo-advisors dominated the market, accounting for a 64% market share and generating $2.64 billion in revenue.p.5
• The United States leads globally in assets under management, reaching $1,172 billion in 2023.p.6
• Vanguard Robo Advisor leads the top 10 robo-advisors worldwide with $206.6 billion in assets under management.p.8
• Robo-advisory assets under management in Saudi Arabia reached $37 billion in 2022 and are expected to reach $57 billion by 2027.p.10
• Sarwa raised $15 million in its Series B round in August 2021, having previously received investment from the $50 million Oryx Fund in January 2020.p.12

Key insights

1. The evolution of robo-advisors spans four phases, progressing from basic questionnaire-based suggestions (1.0) to advanced AI algorithms and dynamic portfolio management (4.0).p.5
2. Hybrid robo-advisory models combine automated portfolio optimization with human advice to serve diverse client needs.p.5
3. Global robo-advisory user count is projected to increase to approximately 234.3 million users by 2027.p.6
4. Key challenges for robo-advisors include managing client acquisition costs, overcoming behavioral biases, and addressing financial advice trust gaps.p.6
5. Emerging industry trends include machine learning enhancement, hybrid advisory models, ESG/SRI ethical investing, gamification, and hyper-personalization.p.7
6. Firms utilizing robo-advisory platforms face primary risks categorized into regulatory, business, operational, and technical risks.p.9
7. A survey of MENA wealth managers found that 68% agreed the pandemic accelerated technology adoption in the region's wealth management sector.p.9
8. Derayah Financial launched Derayah Smart in September 2021 as the first Saudi retail robo-advisor offered by a financial institution.p.10