Registered investment advisors (RIAs) are advisors registered with the U.S. Securities and Exchange Commission (SEC) or registered by the securities agency in a state. The role of the RIAs is to provide tailored financial advice to their clients, and manage their clients' investment portfolios. Generally, the clients of RIAs can be
. The number of RIAs has been increasing annually, with there being approximately 14,800
in 2021. The value of their managed assets also grew over this time, but in recent years, competition has risen on the market: the robo-advisors. These “new competitors” are online platforms that base investments on algorithms with minimal human interaction. Although the value of
in the United States is far below that of RIAs, the assets managed by robo-advisors are growing rapidly and is expected to roughly double within five years.
Do investors prefer a human or robo-advisor?
The use of artificial intelligence (AI) in the financial advisory industry is a relatively new concept. Numerous
investors are opposed to consulting with a robo-advisor as many individuals still emphasize aspects such as establishing a relationship and
the importance of shared values with their financial advisor. However, the role of AI and specifically robo-advisors in the financial advisor industry is expected to continue. As the level of AUM by robo-advisors increases, so too does the use and acceptance of robo-advisors among investors.
Trust levels in robo-advisors are particularly prominent among younger generations of investors.
What does the typical investment advisor look like?
Most of the RIAs in the United States are smaller in size, managing assets between 100 million and one billion U.S. dollars. The majority of clients are individuals; more specifically non-high net worth individuals. Despite this,
the largest share of the AUM for financial advisors comes from pooled investment vehicles, not individuals. Individual investors have more options today than in previous years when choosing a financial advisor.
The average AUM of clients of robo-advisors in the United States reached more than 92,000 U.S. dollars per user in 2022. The introduction of AI has shifted the financial industry as the role of a financial advisor increasingly includes the use of technology or substitutes human consultation with robo-advisors.
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