The number of people making monthly contributions to ETF saving plans in Germany is projected to hit 20 million by 2026, according to research from BlackRock and extraETF.
The revised figures originally predicted that nine million people would be saving into the low-cost investment strategy by 2025 but now forecasts around 15.5 million people will contribute to the monthly plans by the same date.
Currently, 4.9 million people save into ETF savings plans, up from 1.9 million at the end of 2019 as the self-directed client boom consolidates Germany’s position as Europe’s leading ETF market.
Furthermore, the investment volume invested into ETFs by retail investors is expected to quadruple to around €350bn by 2026.
The V-shaped recovery of markets since the COVID-19 pandemic has helped drive investments into the ETF market and has proved a special growth area for digital banks.
The convenient, easy-to-understand and diversified do-it-yourself nature with low barriers to entry have meant ‘neobrokers’ such as Scalable Capital have expanded their offerings to other European markets.
Christian Bimüller, head of digital distribution in continental Europe at BlackRock, said: “ETFs have become mainstream. Never has there been so much talk among the population about the possibilities of this type of investment, which is associated above all with the topic of private pension provisioning.”
According to BlackRock, the ETF savings plans are starting to gain traction in other countries including France, Italy, Austria and Spain.
However, the rest of Europe has some catching up to do and while some digital banks have made headway it is a continent still dominated by the private banking space.
Initiatives such as the Retail Distribution Review, first established in the UK in 2012, have not moved the dial on retail investing as much as was anticipated while Spain actively disincentivises ETFs through tax penalties for switching into an ETF that does not exist for mutual funds.
Despite this, Bimüller added: “In other European countries, we are increasingly seeing this model for success of continual investing in ETFs also gaining in importance, not least due to the expansion of a growing number of neobrokers, whose offerings are meeting the generally rising interest of investors in Europe.”
While other countries might be riding the coattails of the German success story, asset managers issuers continue to expand their operations in Germany in a bid to gain market share in the booming ETF industry.
In February, Vanguard launched an index fund-based digital investment service for retail investors in Germany with a “fair and transparent fee structure”, charging a 0.65% all-in service fee and average 0.15% fund fees, with “no hidden costs or commissions paid to bank advisors or intermediaries”.