With a robo-advisor, investors can invest easily and automatically over the Internet. However, the offer is less crowded than expected. Why is that?
AAutomated investments on the Internet are only slowly reaching German savers. The robot platforms, where investors can invest money in fund portfolios, are getting less crowds than initially expected, said the consulting firm Oliver Wyman. This is not only due to the fact that many Germans notoriously distrust the stock market, but also to the banks, which often prefer their own lucrative funds for sales.
“The industry’s hopes have not been fulfilled,” says Matthias Hübner, partner at Oliver Wyman. Many digital asset manager providers, including startups, would have underestimated the importance of a well-known brand and the cost of acquiring clients. In addition, investment programs, the so-called robo advisors, are aimed at a niche of customers who like to use Internet offers and are also interested in securities. “Both together are rare.”
With the robo offers, savers indicate what investment periods, income and risk appetite they have. Then a computer suggests a standard portfolio – mostly made up of index funds (ETFs) of asset classes such as stocks, bonds and real estate. Some providers adjust the portfolio automatically when stock market risks increase, others reset the allocation after a period of time. The advantage: Investors do not have to orientate themselves in the securities jungle.
Savers can take part for as little as 1,000 euros. Digital asset managers usually promise four to six percent returns per year in the long term with fees of 0.5 to around one percent.
Many investors prefer to invest independently
Investment robots offer savers the advantage of simplified asset management, says the Federation of German Consumer Organizations (vzbv). The quality of the still quite new instruments is difficult for investors to judge: “Consumers must be able to understand what algorithms decide how when investing money.” And the BVI fund association believes that investors need prior knowledge of the stock market.
But many experienced investors prefer to invest independently in ETFs, which is even cheaper. Hübner is already observing the first takeovers and withdrawals at Robos. “This trend will accelerate.”
According to Oliver Wyman, the assets under management of robo advisors more than doubled to 2.8 billion euros in 2018. However, it remained well below the consultants’ expectations of 3 to 4 billion. Only now the market could have grown to around 4 billion, they estimate. Measured against the assets in traditional investment funds, that’s a piece of cake: According to the Bundesbank, German private investors have invested around 600 billion euros there.
Investment robots were initially considered to be smart instruments to bring traditional savers closer to investments on the stock exchange. The Germans could simply invest their money in securities portfolios – this is the hope of start-ups and banks. More than 40 providers are already competing for customers. But in the end it became quiet about the industry.
Few companies have divided the market among themselves. Scalable Capital alone manages more than 1.5 billion euros. The start-up from Munich benefits from a cooperation with the direct bank ING. The larger addresses include Quirion with 280 million and the start-up Liqid with almost 500 million, which woos the wealthy with complex investments and advice.
The market is divided among the big ones
However, nothing is known of any major sales successes of the banks. While the cooperative banks do not give any figures for their robo-advisor “Visualvest”, the savings bank offer “Bevestor” amounts to just 15 million euros – with a sales force of 260 cooperating institutes.
The only thing that Deutsche Bank says is that its own “Robin” solution is one of the five leading providers in this country. The goal for 2019 is the top 3. “Cominvest” from Commerzbank manages at least 500 million euros. The assets under management increase mainly through their own efforts, “without large marketing budgets”, it says there.
Consultant Hübner also observes that financial institutions do not do much advertising for digital asset managers. “The banks are cautious about marketing their solutions. They fear cannibalization of their own funds. ”Internal competition among financial institutions is great, he says. “A classic mixed fund with an issue surcharge is more lucrative for you in case of doubt.”
Nevertheless, he expects further growth in the money investment robots – also because insurance companies such as Allianz and their asset manager AGI are pushing into the German market. This year, robo advisors could manage 5 to 6 billion euros and in 2020 for the first time more than 10 billion euros, estimates Oliver Wyman. With the younger generation more tech-savvy, more money is likely to flow into digital asset managers.
But even with Robos in Germany, you can’t do without advice, providers notice and answer customer questions, sometimes via chat or telephone. And some even offer personal advice – a bit like in the past, in the good old branch.