Traditional investment managers are facing increasing competition from digital robo-advisors which provide their clients with digital investment solutions. They also offer great potential with regard to ETFs – Exchange Traded Funds, for private investors in particular. Gregor Puchalla, Managing Director of the etventure subsidiary FintechStars as well as Managing Director of FinTechCube, spoke about the current trends and new fintech business model in an interview with “die bank.”

The demand for Exchange Traded Funds (ETFs) is unbroken; however, their proportion of the total volumes of the fund market is far higher in the USA than in Europe. “ETFs have a massive catch-up potential in Europe,” states Gregor Puchalla in the article. One reason is that it is an investment instrument which has been used primarily by institutional investors and less by private investors to date. “Fintechs can contribute to moving this relationship through new models such as robo-advisor or the Riester approach on an ETF basis to the benefit of private investors, “ says Puchalla.

This is because digital players are increasingly challenging established financial service providers with new, smart business models, but also offering themselves as valuable cooperation partners for traditional investment advisors and banks at the same time. The USA is also leaping ahead in these new types of coalitions. “Large US financial corporations in particular are increasingly discovering robot and hybrid models and using startups with robo-advisory concepts, for example as a sales route for their own ETFs.” explains Gregor Puchalla. In the meantime, however, the first forms of collaboration between fintechs and companies have been set up on the German market.

It is also highly likely that different digital providers from the robo-advisory and social trading areas will merge in the future. Puchalla has more to say on the subject: “To date, the passive, ETF-based financial strategies of the robo-advisors have been very different to the active investment strategies of social trading providers [….]. However, there are already ideas on how to merge these two worlds which we are working on in our own fintech incubator “FinTechCube.” One very promising use could be to replace an active strategy with a certain risk profile given by a robo-advisor as soon as a trader cannot or does not wish to continuing trade his strategy on a social trading platform.”

With the incubator FinTechCube founded in December 2015, FintechStars founded the first full-service provider in this area together with Finance Base AG. FinTechCube aims to develop new, user-oriented fintech business models. In the process, fintechs are supported by entrepreneurial and financial know-how. On the other hand, established financial service providers also receive help with the digitization of their business model.