Automated investing on the internet is slow to reach german savers. The robotic platforms that allow investors to invest money in fund portfolios have met with less interest than initially expected, according to the consulting firm oliver wyman.
This is not only because many germans are notoriously distrustful of the stock market, but also because banks often prefer to sell their own lucrative funds.
"The hopes of the industry have not been fulfilled," says matthias hubner, partner at oliver wyman. Many digital asset management providers, including startups, had underestimated the importance of a well-known brand and the cost of customer acquisition. In addition, investment programs ("robo advisor") were aimed at a niche of customers who liked to use internet services and were also interested in securities. "Both together are rare."
In the case of the robo offers, savers specify, for example, what investment period, income and risk preferences they have. Then a computer suggests a standard portfolio – usually of index funds (etfs) of asset classes such as equities, bonds and real estate. Some providers automatically adjust the portfolio as stock market risks grow, others reset the allocation after a period of time. The advantage: investors don’t have to navigate the securities jungle themselves.
Savers can sometimes be in for as little as a one-time 1000 euros. Digital asset managers usually promise four to six percent returns per year over the long term, with fees ranging from 0.5 to around one percent.
Investment robots offer savers the advantage of simplified asset management, finds the verbraucherzentrale bundesverband (vzbv). However, the quality of the still fairly new instruments is difficult for investors to assess: "consumers need to be able to understand what algorithms decide how to invest money." And fund association BVI says investors need prior knowledge of stock market.
But many experienced investors prefer to invest in etfs on their own, which is even cheaper. Hubner already observes first takeovers and jerks at robos. "This trend will accelerate."
While robo advisor assets under management more than doubled to 2.8 billion euros in 2018, according to oliver wyman. However, this fell well short of advisors’ expectations of 3 to 4 billion. Only now could the market have grown to around 4 billion, they estimate. Compared to the assets in traditional investment funds, this is nothing: according to the bundesbank, german private investors have invested around 600 billion euros in these funds.
Yet investment robots were initially seen as smart tools to bring traditional savers closer to investing on the stock market. Germans could use it to easily invest their money in securities portfolios, startups and banks hoped. More than 40 providers are already courting customers today.
But lately it has become quiet around the branch. A few companies have divided up 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. Among the coarser addresses are quirion, with 280 million, and the start-up liqid, with almost 500 million, which is wooing potential customers with complex systems and consulting services.
However, there is no evidence of any rough competition between the banks in the distribution sector. While the cooperative banks don’t even mention any figures for their "visualvest" robo-advisor, the savings banks’ "bevestor" product has just 15 million euros in it, according to the latest figures – with the sales power of 260 cooperating institutions.
At the german bank it is only said that its own solution "robin" is one of the five leading providers in this country. Aiming for the top 3 in 2019. "Cominvest" from commerzbank subsidiary comdirect manages 500 million euros. The assets under management grew primarily on his own, "without a large marketing budget," he says.
Consultant hubner also observes that money houses do not make a big push for digital asset managers. "The banks are only cautiously marketing their solutions. They fear cannibalization of their own funds." The internal competition at the money houses is rough, he says. "A classic mixed fund with an issue premium is more lucrative for them in case of doubt."
Nevertheless, he expects further growth of the money investment robots – also because insurance companies such as allianz have penetrated the german market with their asset manager AGI. 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. Also, with the more tech-savvy younger generation, more money was allowed to fall into digital asset managers.
But even robos in germany can’t do without advice, providers note, and answer customers’ questions, sometimes by chat or phone. And some even offer personal advice – a bit like in the good old days, in the good old branch store.