Two or three clicks and your retirement planning is ready – that’s what robo-advisors promise. But can investors trust a program?
The fear of automation is spreading. But it’s not just factory workers who have to tremble before the growing intelligence of computer programs, complex jobs may also no longer be safe: with the rise of so-called robo-advisors, bank advisors are also in a shaky boat.
The complex computer programs that use artificial intelligence (AI) to manage an investor’s portfolio currently have a niche existence. Still. The market share of robo-advisors in Germany is currently small (around 25, as of March 2024), but the number of users is growing rapidly. Since 2017 alone, the number of investors has increased almost tenfold.
According to a survey by the statistics portal Statista, more than two million Germans now have their investment strategies recommended by AI. Investors also no longer carry out the purchases and sales themselves. Risk analysis, tax deductions, strategy adjustment? The robo-advisor takes care of everything in the background (read more about this here).
Banking industry will feel “significant consequences”.
The program is tailored to the investor’s wishes and goals. It can be low-risk, high-risk and even completely sustainable investing. The all-round carefree package from AI offers many advantages, especially for inexperienced investors. But is that enough for the rise of robo-advisors? Will Germans really put their finances in the hands of algorithms?
René Fischer, management consultant and industry expert from the strategy consultancy Oliver Wyman, does not yet see this trend. “Many investors want someone they can call to have control over their financial investments,” he says. “In the short term, robo-advisors will not replace bank advisors.” According to him, job creation will initially only be in the single-digit percentage range over the next five to ten years.
A temporary all-clear. In the long term, the market share of robo-advisors will grow very strongly, according to the expert. “This will have significant consequences for the entire industry,” says Fischer.
Already common in the USA, only emerging in Germany
The majority of Germans currently do not trust robots to help them with their money. In a country where most drivers still rely on stick shifts, few let a machine touch their finances.
In a Bitkom survey from 2020, only a very small proportion of investors stated that they had previously invested money with a robo-advisor. Nevertheless, the curiosity is there: 22 percent could imagine the system with the robo-expert.
This is also shown by the Statista forecasts for the coming years: in 2024, 3.7 million Germans could invest their money with the help of AI – in 2017 there were still 291,000.
Robo-advisor providers such as Scalable Capital and Fidelity are also reporting increasing user numbers. According to Scalable, the Corona crisis in particular would have fueled the growth.
In the USA, investors are already much further along. According to current model calculations, the amount managed by AIs is expected to rise to 840 billion by 2024. “Significantly more people own stocks in the USA than in Germany. And Americans are more willing to take risks,” says David Rüffer, financial officer at the digital association Bitkom, explaining this difference.
Getting started for financial newcomers
In the USA, large companies also invested large sums in new innovations such as neobrokers or robo-advsiors. This gives the new technologies a head start in trust among American customers, explains Fischer. “In Germany, on the other hand, companies do not want to endanger their traditional main business and therefore allow innovations to start on the side.” There is therefore no advantage in trust among German customers; new ideas have a harder time.
German investors in particular could benefit from robo-advisors: 55 percent of Germans rate their financial knowledge as poor, according to a t-online survey. This is also reflected in the low shareholder ratio in Germany. Only 17.5 percent of Germans over the age of 14 dare to enter the stock market. This is where the digital expert could step in. The investors give the money – the program plans the strategy, buys and sells.
