Startups in the financial technology industry are tackling a number of problems.

Some process your payments digitally, while others propose alternative lending models. But there's one problem all of these companies are trying to fix: the growing frustration that consumers have with the way banks and other financial services do business.

Frequently referred to as "robo-advisers," virtual wealth managers now provide easy-to-use online investment services -- and they're growing at a faster rate than usual. The model itself isn't so hard to understand: robo-advisers rely on automated software to create investment portfolios and give clients advice on investment options.

Digital investment services are appealing to customers, especially Millennials, because they charge low interest rates. The market is clearly ripe for disruption, and upstarts could steal as much as $4.7 trillion in annual revenue and $470 billion in profit from traditional banks, according to recent report from Goldman Sachs.

11 leading virtual wealth advisers -- all founded after the 2008 financial recession -- significantly upped their assets under management (AUM) in 2014. In a report from research firm Corporate Insight, data from July 2015 revealed that the companies were giving paid advice on an impressive $21 billion, collectively, in investor assets. 

The $21 billion includes $8 billion under management, and $13 billion worth of assets where clients didn't cede control of their money, and received paid advice. This represents a 34 percent increase from July 2014, and an increase of 11 percent from December.

Betterment and Wealthfront are the two largest services among the companies included in the data. At present, they each control nearly $2.6 billion in AUM. Both companies will analyze your risk, and then set you up with exchange-traded-funds. They also offer tax-loss harvesting services. Betterment is billing itself as a more personalized advisor, where clients can set up an account even if they have no money. Wealthfront doesn't hold portfolios, it mainly manages them. The company requires an minimum investment of $500.  

While a number of fintech startups have seen steady growth in assets over the past few years, the most recent months have been especially notable. Earlier this year, traditional brokerage firms launched proprietary digital advice platforms, which have not yet stolen much business from the upstarts. 

The popularity of robo-advisers indicates a significant disruption in the fintech industry, and implies the need for human advisers to embrace the new business model of advanced technology.

Here are a few points that explain the rapid growth of these services:

1. They set you up with passive investments.

Robo-advisers help you set up exchange-traded funds (ETFs,) as opposed to the more traditional mutual funds, which are managed by human advisors. ETFs are traded like stock, and tend to be cheaper for investors since they don't beckon fees associated with mutual funds. 

As investors increasingly take notice of this new strategy, they're also becoming more comfortable with online platforms, says Corporate Insight analyst Sean McDermott.

In fact, recent data from Morningstar found that since 2005, passive funds have been on the rise as active investments plummet to an all-time-low. The investment research firm reported that active funds saw outflows of $20.5 billion in July and nearly $159 billion over the past 12 months.

"Our core is that we offer smarter technology to help people better answer the question: 'What should I do with my money?'" says Jon Stein, founder and CEO of Betterment, which only manages passive investments. "ETFs are far more efficient than mutual funds [because] they're cheaper and more liquid," he explains.

Wealthfront offers direct indexing in addition to ETFs: "We can buy for you all the individual stocks in the U.S. Index," says Wealthfront CEO Adam Nash. "The reason that's such a big advantage is that you save on product costs." 

Nash, whose company is based in Palo Alto, Calif., has long been privy to the Silicon Valley zeitgeist. Prior to joining Wealthfront, he worked for eBay, LinkedIn, and Apple. 

2. Cheaper than traditional alternatives.

At large, tech is at the heart and soul of what they do, and how they deliver their services, McDermott says of digital advisors.

Clients can set up an account for these services at a fraction of what they'd be charged by traditional wealth consultants. WiseBanyan, for one, is billing itself as the world's first completely free financial advisor. The startup will bring in revenues from offshoot services, like tax loss harvesting.

Betterment charges an interest rate of between 0.35 and 0.15 percent, depending on the size of your account. It has no minimum investment requirement. Wealthfront charges 0.25 percent, with a minimum investment of $500. It recently lowered that minimum from $5,000 in July of this year, as it continues to offer services for free to clients with accounts with less than $10,000. 

These firms can afford to offer lower fees because their platforms reduce back-end costs and require fewer employees, especially as their assets under management continue to grow. 

As Nash sees it, traditional wealth advisors are more expensive because they require costly factors in order to operate business. Two of the biggest are rent for retail locations and advisers' salaries. "We don't have either of these two large costs," he explains.  

Still, McDermott warns that there's a lot of uncertainty in the future for robo-advisers. "They all came onto the scene post-recession, which created an opportunity for them," he explains. "Without that human presence to talk the investor off the ledge, will these firms retain their top client assets if the market goes down?" 

Wealthfront, however, is confident that clients won't need talking down, in that it doesn't sell them on "false promises." Typically speaking, a Wealthfront customer isn't looking to beat the market, and is instead trying to reap benefits from when it dips, say, through their tax loss harvesting services. 

"A better way to think of it is the traditional "do-it-yourself" investing," says Stein. "You're taking advantage of the volatility in the market." 

3. They're creating competition, and raising bars that benefit consumers.

As robo-advisers continue to grow -- racking up millions in venture capital, and increasing their employee head count -- more traditional wealth firms are taking a cue and launching their own online services.

Vangaurd and Charles Schwab are two of the newest entrants into the "robo" space. The giants may represent something of a threat to startups, in that they come with pre-existing relationships in the industry that those companies may not have. 

McDermott notes that robo-advisers may still have the upper hand, since they don't have a negative financial history. "Wealthfront and Betterment have never been bailed out by the government," he explains.

Many low-cost investment advisers have since pivoted to serve other financial institutions (i.e., retirement plan providers), with many shifting away from the direct-to-consumer approach altogether. While Wealthfront still primarily works on a direct-to-consumer model, Betterment has launched "Betterment Institutional," serving high-profile companies like Fidelity.

Pivoting helps these companies to diversify their revenue streams, which may better set them up for profitability or an IPO. 

"Most of them are pretty much VC-backed, and that's how they're getting started," says Darrin Courtney, a research director who specializes in wealth management at CEB TowerGroup. He doesn't believe the business models that most robo-advisers use will lead them to profitability in the long run.

Stein, for his part, notes that Betterment is already profitable on a per-customer basis. 

Nash, on the other hand, says it's a fair concern, adding that Wealthfront has raised nearly $130 million in funding to date. But, in the meantime, he says: "We're just focused on building out what's possible with technology."