A recent event has seen senior leaders at BlackRock, and selected clients specialising in online investment platforms, discuss the evolution of digital distribution models through ETF savings plans, how commission free trading is bringing new investors to financial markets and how individual investor preferences are shaping local markets in Europe.
The firm writes that globally, tens of millions of investors are using digital platforms and affordable ETF savings plans (automated regular investment plans into ETFs) to access financial markets for the first time to achieve their investment goals.
“We see banks evolving their distribution models as investors across Europe express their preferences for self-directed investments through new digital investment offerings from independent players and banks. Accessing investments directly has never been easier, with more FinTech challengers entering the banking, brokerage, and wealth management markets, with increasingly innovative models.
“ETF savings plans are key for incumbent banks and new players alike, driving loyalty and providing a pathway for people to access the benefits of investing. These plans enjoy increasing popularity across Europe with many first-time investors seeking alternatives to their savings account, offering a convenient addition to current accounts.”
The firm notes that neobrokers and neobanks have expanded across Europe at an incredible rate. “Wealth management platform Scalable Capital is active in Germany, France, Spain, Italy, the Netherlands, and Austria, whilst neobroker BUX is available in the Netherlands, Germany, Austria, France, Belgium, Ireland, Spain, and Italy. At the end of October, Trade Republic increased its ETF savings plans offering, and is now available in 17 European markets.”
This builds on the momentum seen in Germany, where the number of ETF savings plans managed via digital investing platforms is likely to rise to 20 million monthly contributions by 2026 – from currently 4.9 million, the firm says. It is estimated that one in four Germans will have an ETF savings plan by 2026.
Christian Bimueller, Head of Digital Distribution for Continental Europe at BlackRock says: “The remarkable growth of digital investing and ETF savings plans across Europe has enabled millions of investors to participate in financial markets for the first time. This growth has been in part due to the phenomenal versatility that digital investment platforms offer – investors are able to capitalise on low fees and minimum investments, whilst new investors can build investments and knowledge of financial markets in an easily accessible format.”
BlackRock writes that the biggest driver of digital investing and ETF savings plans has been the evolution of commission free trading platforms – more than 40 million new self-directed investment accounts have been opened globally since 2020 – enabling a rise in retail participation. These new investors are empowered by the simplicity of digital investing platforms and the convenience of ETFs, the firm says.
At a time when household finances are under pressure, dollar-cost averaging (systematically investing equal amounts of money at regular intervals, regardless of the price of a security) allows regular investors to benefit in the long term from a short term drop in the market.
Nick Hutton, Head of BlackRock’s UK iShares & Wealth business says: ‘In the UK, as digital investing becomes the fastest growing segment for wealth investors, it will be crucial for both traditional and challenger investment providers to reach this next generation of digitally savvy UK investors with simple and accessible wealth offerings which meet their financial needs. Looking forward, our prediction is that the number of digital investing customers in the UK will reach 20 million by 2030. To engage with the next waves of digital investors, neobanks and brokers will have to look at the investment platform in a new way, producing innovative solutions that are altogether different.’
The first five million investors were different people to the last five million, requiring a platform that brought them investing in a more engaging, seamless, and ‘do it for me’ way, the firm says.
Digital investment platforms are reaching a new pool of money, with younger investors taking their first steps due to low minimum investment amounts and even lower, transparent commission fees. These sophisticated investment tools are available to investors for as low as one pound or euro, according to BlackRock.
“Digital investing breaks down barriers for people coming to financial markets with more efficient account opening and set up procedures. These models contribute to dispelling the belief that investing is too complex for first time investors.
“Investing has gone mainstream, as neobrokers add social elements to their platforms and access new marketing channels such as podcasts and social media. Brokers are beginning to add wealth management to their offerings, enabling more complex discretionary portfolio management.”