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Financial Planning

Robo-adviser reaches US$50bn milestone

While the local robo-advice industry flounders, Wealthfront has hit a record high of more than US$50 billion ($77bn) in assets under management, catering to 700,000 investors.

The US robo-adviser boasted that as it continues to diversify offerings, its EBITDA margins sit above 40% and is on track to grow revenue by over 140% in 2023.

It has expanded its digital advice offering into cash management, lending, and most recently, lower-risk investments with its Automated Bond Portfolio.

"The company is well-positioned to capture the $35 trillion held by young professionals and will continue to address their diverse financial needs. Hitting this milestone only deepens Wealthfront's dedication to empowering young professionals to achieve their financial goals and shaping the future of personal finance," Wealthfront chief executive David Fortunato said.

UBS was set to acquire Wealthfront for US$1.4 billion in early 2022 but fell through a few months later. Both parties said that it was "mutually agreed" upon to terminate the deal. Wealthfront had about US$27 billion ($41bn) in AUM at the time.

Wealthfront's close rival Betterment had over US$40 billion ($61bn) in AUM and some 800,000 investors at the end of August.

Also a major player in the automated investing space, Vanguard's Personal Advisor Services, a hybrid human and digital offering, has about $271 billion in assets while Digital Advisor, its pureplay automated adviser, manages $13 billion (as at 30 June 2023).

"This milestone is a testament to our team's relentless focus on creating value for our clients and our commitment to building a profitable company that puts clients' interests above our bottom line," said Fortunato.

The local robo-advice and fintech industries, meanwhile, look to be grappling with the current economic environment, spooked investors, muted client interest, and regulatory strangulation.

A new analysis by KPMG, the Australian fintech survey report 2023, highlights that more than half of fintechs find the current economic conditions more challenging than last year.

Not only is it harder to raise capital, but stringent monetary policy has also made it tougher to access lending and credit facilities, severely hindering their ability to scale and expand operations, or simply survive.

Nearly 30% of the 58 fintechs surveyed flagged a "very negative" or "negative" outlook for the next 12 months. Apart from sourcing capital, other challenges that await include retaining or gaining customers, and finding ways to stem revenue contraction.

KPMG valued total fintech investment at $349 million in the first half of 2023 - a sliver of the $3.3 billion made during 2022 - as investors shun higher-risk growth investments.

"These prevailing market conditions have ultimately forced the fintech sector to consolidate, with ventures having to re-evaluate their risk profile and appetite for growth over profitability," KPMG Australia partner of mergers and acquisitions and head of fintech Daniel Teper said.

"Looking ahead, it is reasonable to assume that a few of the above-mentioned negative catalysts will ease their pressure on the market, and investors will once again turn their attention to growth investments in the sector and allowing fintechs to refocus their attention on innovation and expansive growth."

Read more: WealthfrontRobo-adviceKPMGRobo-adviserBettermentDaniel TeperUBSRobo-advice in AustraliaAustralian robo-adviser