Is it too late for a new firm to enter the robo advice business?

Robo Advice Business

The robo advice industry is still nascent. We are still in the early-days of this industry, even though this industry has been evolving since last 10 years. So, there are ample opportunities for more innovation and better service.

That said, the entry barrier has increased for new entrants, because the existing robo advice firms have been able to reach a certain level of product sophistication and brand awareness. Moreover, robo advice firms should be prepared for the long haul to generate profits. It is being discussed that a robo advice firm in the US should have at least US$40 billion under management to become cash-flow positive (assuming no further investment in new product development). So, in every geographical market, only those firms that get to a considerable scale will have a viable business in the long run.

In this situation, a new, capable team can certainly consider to enter this business in preferable markets such as the US, UK, Australia, Canada, Germany, France, Japan, etc., if they have one of these strengths:

  • Product innovation where a completely new approach of engaging with clients has been figured out.
  • Technological innovation where a completely new way of building the complex product has been figured out.
  • Formidable fundraising capability to raise a lot of money to give a tough fight to the existing robo advice incumbents.

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