2023 AUM Growth

The robo-advice industry experienced a significant rebound in 2023, recovering from the dramatic pullback in 2022. Market corrections in the 2022 fiscal year put downward pressure on assets, but the broader cycle saw markets and AUM quickly recovering. By mid-2023, both Schwab and Vanguard had rebounded, posting growth over the 2022 and 2021 year-ends. By the end of 2023, Vanguard’s AUM increased to $311.9 billion from $251.4 billion, and Financial Engines saw its AUM rise to $270.8 billion from $242.0 billion. Schwab also grew its AUM to $80.9 billion from $70.5 billion, demonstrating the resilience and recovery of these market leaders.

All told the industry has reached a mature milestone. We now estimate the robo-advice industry, including robo advisors within the employer plan advice space, like Financial Engines, has crested $1 trillion in client assets. We estimate that at the end of 2023 robo advisors managed $1.089 trillion in assets.

The industry’s evolution over the past year has led to the exit of several less-performing firms that could not sustain their operations or align with their existing business models. This trend reflects a broader maturation in the robo-advice market, where early rapid growth has given way to a more stable, albeit competitive, environment. Notable exits include JPMorgan Chase and Goldman Sachs, both of which faced significant challenges despite their established reputations. Goldman Sachs is closing its automated investing business, Marcus Invest, transferring clients and their assets to Betterment. JPMorgan Chase also announced it is discontinuing its purely digital robo-advisor, J.P. Morgan Automated Investing, transitioning clients to its self-directed online investing brokerage offering. These moves highlight the difficulties even large financial institutions face in achieving scale and profitability in the robo-advice space.

Smaller, independent robo advisors also saw growth in 2023, despite previous market challenges. Betterment’s AUM increased to $45.9 billion from $36.6 billion, and Wealthfront’s rose to $29.9 billion from $25.2 billion, according to ADV filings. Acorns grew to $8.2 billion from $6.3 billion, and other independents like Ellevest, SigFig, SoFi, and Stash also posted AUM growth. However, some players like Axos saw a decline, with AUM decreasing to $143 million from $155 million.

As the industry is reaching maturity, client growth is slowing. Tracking the number of clients can be a better gauge of platform growth as it is not impacted by the growth of existing accounts from investment gains and client deposits.  Betterment and Wealthfront continue to add clients but at a slower rate than in years past.

Betterment’s annual client growth rate has decreased from around 20% in the years 2018 - 2020 to 8% in 2023. Wealthfront clients grew by a remarkable 42% in 2018, and its annual growth rate was in the teens for 2019 and 2020. In 2023 we estimate Wealthfront grew clients by just 1.4%. Acorns has acquired clients rapidly over the years.  In 2019, 2020, and 2022, the platform grew clients at a rate of more than 40% year over year.  In 2023, they grew by just 13%. The industry is transitioning from its rapid growth stage to a mature phase, where the focus will likely be on maintaining growth and improving profits.

The robo-advice industry has shown remarkable resilience and adaptability in the face of market challenges. The future of robo-advisory services will depend on how well these firms can navigate regulatory landscapes and integrate new technologies to meet the evolving needs of their clients.