Online investment platforms and the dramatic increase in retail investor participation over the past few years is shaping ETF distribution models and the future of the market.
The European ETF industry has been patiently waiting for the growth of retail adoption across the continent for many years.
Unlike the US, the European ETF market is dominated by institutional investors which account for approximately 80% of total assets this side of the pond.
Since the pandemic, however, there has been a huge shift in investor behaviour,especially in Germanyamid the rapidly developing demand for ETF savings plans.
According to forecasts from BlackRock and extraETF, the number of ETF savings plans could rise to 20 million in Germanyby 2026, up from 4.9 million at the start of this year and 1.9 million by the end of 2019.
The rapid increase in ETF savings plans reflects how commission-free trading is encouraging new investors to the market.
As Jane Sloan, head of iShares, EMEA, at BlackRock, said: “As the year draws to a close, the growth of ETF savings plans and the resilience of digital investing stands out. ETF savings plans are playing a key role in converting savers into long-term investors.”
As a result, ETF issuers have doubled down on increasing their digital presence in markets such as Germany and Italy with Amundi partnering with FinecoBank in September to offer Italian investorsaccess to its ETFs.
Meanwhile, BlackRock has been increasing its stake in digital wealth management platform Scalable Capital, which expanded into the Italian market this year, between 2017 and 2020 while DWS promoted Ferat Öztürk to head of passive sales digital distribution for EMEA earlier this month having previously been responsible for solely Germany.
Even in the UK – an ETF market that has been traditionally dominated by professional investors – there are signs of growing retail investor adoption.
Highlighting this, BlackRock estimates the number of digital investing customers in the UK will reach as many as 20 million by 2030.
Furthermore, according to AJ Bell, four ETFs made the top 10 most purchased funds in 2022 on the firm’s platform in a sign investors are becoming increasingly familiar with the benefits of ETFs.
As Christian Bimueller, head of digital distribution for continental Europe at BlackRock said: “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 while new investors can build investments and knowledge of financial markets in an easily accessible format.”