New research commissioned by BlackRock and conducted by the investor portal extraETF has found that the number of ETF savings plans being used by European investors to meet their long-term investment goals is expected to quadruple over the next five years. The report finds that growth has continued since 2021, despite market volatility and rising interest rates in an analysis that covers the current market for ETF Savings Plans in Germany, France, Italy, Austria, and Spain.
extraETF analyses trends and expectations for the “ETF Savings Plan Market in Continental Europe”, and predicts that by the end of 2028, 32 million ETF savings plans will be executed on a monthly basis across Continental Europe, up from 7.6 million in September 2023. Markets outside Germany are analysed by extraETF for the first time.
By the end of 2028, annual investments in ETF savings plans by private investors in Europe are expected to cross EUR64.3 billion, up from EUR15 billion at end of September 2023, according to extraETF. Currently, each month, German investors save EUR164 on average according to the banks and brokers analysed by extraETF. According to the same analysis, the average ETF savings plan rate is slightly higher in the rest of Continental European at EUR 175.
As the report notes, in June 2017, when the trend towards ETF savings plans was still in its infancy, the number of ETF savings plans executed monthly reached 500,000 in Germany, then a million in May 2019, and by December 2020 there were more than two million ETF savings plan executions. This growth momentum entered a new phase with the debut of commission-free brokerage platforms who started to offer savings plans for almost all ETFs from as little as one Euro.
By end September 2023, 7.6 million ETF savings plans were executed a month in Continental Europe, 500,000 of which came from outside Germany. extraETF forecasts that by 2028, 10.7 million savings plans are expected to be executed monthly across Europe, outside Germany, accounting for one third of forecast executions.
ETF savings plans have become popular among long-term savers
ETF savings plans have gained tremendous popularity for several reasons. Savers may benefit from the simplicity, low costs, and the ability to accumulate wealth over time. With just a few Euros per month, investors can access diversified portfolios across various asset classes, and the flexibility to adjust their plans as needed. This simplicity and low barriers to entry, combined with the power of compound interest and attractive returns, make ETF savings plans an excellent choice for long-term savers, the report’s authors say.
Christian Bimüller, Head of Digital Distribution in Continental Europe at BlackRock, comments: “The surge in ETF savings plans shows that many Europeans are becoming investors to achieve their long-term financial goals. With more and more people, particularly younger ones, embracing these investment options, there’s a growing array of choices available through digital wealth management platforms. Making investing easier and more affordable for everyone is one of BlackRock’s goals that we try to achieve hand-in-hand with our European partners.
“The pan-European expansion of commission-free brokerage platforms and the adoption of local players is now accelerating the use of ETF savings plans across Europe, bringing investing to millions more Europeans.”
Markus Jordan, CEO of extraETF, comments: “With our study, we make an important contribution to a better understanding of the continental European ETF savings plan market. Issuers, index providers and brokers gain deep insights into the specifics of the most important country markets, the local usage behaviour, and the major growth opportunities. This helps to leverage the value potential of ETF savings plans and develop tailor-made solutions. With our research and tools, we will continue to actively accompany the process of democratising financial investment in Europe and thus help investors achieve financial growth.”
Germany’s thriving ETF savings plan market
Germany stands out as a thriving market for ETF savings plans, making it the largest in Continental Europe. As shown by the report, the number of ETF savings plans in Germany has increased twelvefold since 2016. According to the report, the competition among banks and brokers is robust, and the emergence of commission- free brokerage platforms has fuelled this growth, resulting in around 7.1 million monthly executions of ETF savings plans in September 2023.
ETF Boom in Austria: Growing Popularity and Options
Austria is experiencing a similar rising trend in ETF investments, with one in three individuals already investing in ETFs, according to the report. The country ranks as the second-largest market for ETF savings plans across the markets surveyed. The Austrian market has seen an influx of foreign providers and the debut of commission- free brokerage platforms is increasing competition. The report shows that while domestic banks offer ETF savings plans, they are facing strong competition from foreign brokerage platforms, who often provide commission-free and technologically more integrated solutions. extraETF also highlights that the cost structures, product range, and services offered vary across providers, and Austrian investors also favour foreign but fully digitalized brokerage platforms that are easy to use.
ETF savings plans flows are concentrated, with broad exposures in favour
While digital brokerage platforms often offer a wide variety of ETFs eligible for savings plans, the research conducted by extraETF finds that ETFs that track globally diversified equity indices, such as the MSCI World Index, are the most popular ETFs, accounting for 12 out of the 20 most popular exposures in ETF savings plans.
Competition grows
The European market has benefited from pan-European brokerage platforms that can scale their operations and passport services to more markets across the continent. In 2022 and 2023, there were significant milestones for the European ETF savings plan industry, as many independent providers expanded their offerings across Europe.
Traditional, domestic banks are also starting to meet the challenges of demand from the younger generation of investors, such as in Italy, where ETF savings plans are already offered by several digital platforms.
Investors getting younger
Generation Z and Millennials are emerging as a driving force for growth in the European ETF market, whereas currently, ETFs are largely owned by the 35-54 age group. Investors aged 35+ represent 63 per cent of current ETF owners, according to YouGov. BlackRock believes that this younger cohort’s participation in investing through ETFs may be due to their greater comfort with self-directed decision-making and the rise of online investment platforms.
Across Europe, 54 per cent of the next wave of ETF investors will be aged between 18 and 34 years, in contrast to only 32 per cent of new investors aged 35-54. This represents a reversal in ownership as those aged 35+ will represent only 46 per cent of ETF owners. In Germany, the potential two million new ETF investors will represent a 34 per cent increase in the number of 18–34-year-olds investing using ETFs.
