Survey of Swiss public shows trust in digital investment offerings is growing
- New representative study reveals strong potential for digital investment products
- Many investors already invest their money digitally or express an interest in digital investing
- Digital investors in Switzerland favor hybrid digital wealth management solutions
- Established financial services providers have an advantage in terms of trust
- Vontobel expects to see increased demand for digital offerings due to the growing need for investments
The number of fintech firms in Switzerland has almost doubled over the last five years. Around 150 fintechs provide services in the area of investment management. However, potential Swiss users of digital investment opportunities trust the solutions offered by established financial services providers more than those of fintechs. The hybrid model – comprising a digital tool with an established banking provider in the background – has especially strong potential, as the majority of investors don’t wish to give up the support of a personal advisor. These are the findings of the study conducted by the Institute of Financial Services Zug IFZ of the Lucerne University of Applied Sciences and Arts. It was commissioned by Raiffeisen and Vontobel to carry out a survey of more than 1,200 members of the Swiss public aged between 18 and 79 across all regions of Switzerland. The average age of digital investment products users was found to be 50 years, although Swiss respondents aged over 65 are best informed about digital investing. The study also revealed that women are less well informed about these offerings than men. The topic is growing more important due to the low interest rate environment and the increasing need for pension provision. Although many of the survey participants were generally not well versed about wealth management, one quarter of Swiss respondents already invests digitally or could imagine using such products in the future. More than half of all investors was not familiar with specific digital investment products. The Lucerne University of Applied Sciences and Arts believes that this area offers significant potential for the coming years. Digital investment products could become standard offerings at many banks in the next few years.
According to the study ‘Digital Investing in Switzerland – A Market with Potential’ published by the Institute of Financial Services Zug IFZ of the Lucerne University of Applied Sciences and Arts, the greatest potential for digital investment opportunities can be found among members of the Swiss public who reach their own independent investment decisions (‘Soloists’) and among the group of so-called ‘Validators’ who essentially take investment decisions with the support of partners or investment advisors.
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At 56%, Validators represent the largest group of investors in Switzerland, and 7% of them already invest their assets digitally, while 12% see themselves as potential users. Validators are found most frequently in German-speaking Switzerland and Ticino. They are often members of the baby boomer generation and are mainly women. Soloists consist primarily of men from German-speaking Switzerland who belong to Generation Z or Generation X. They represent the second-largest group of investors at 34% of survey participants. Every tenth Soloist already uses digital wealth management solutions, and every fourth Soloist could imagine investing money digitally in the future. The smallest group of investors, accounting for 10% of respondents, are ‘Delegators’. In general, they fully delegate their investment decisions to their advisor. Among Delegators, 6% already invest digitally at present, and 11% state that they could imagine doing so in the future. Women, members of Generation Y (born between the early 1980s and the late 1990s) and people from French-speaking Switzerland are overrepresented in this group of investors.
Transparency and user friendliness are the priority
The fact that digitalization is not a question of age is demonstrated by the finding that respondents aged over 65, as well as people from German-speaking Switzerland, men and also people with more than CHF 100,000 of assets feel they are best informed about digital investment solutions. Members of the Swiss public mainly expect a digital wealth management solution to offer transparency (54%). Validators are seeking transparency (57%), user friendliness (39%) and simplicity (48%). The study also shows that clients are prepared to pay an appropriate price for a good offering. Validators and Delegators in particular assign less importance to costs than to transparency and user friendliness. Compared to Soloists, these client groups also assign a disproportionately high level of importance to a broad digital product range and to the option to personalize the portfolio. Soloists, for whom these aspects are less important, are most focused on pricing (63%).
Growth potential for hybrid models
The demand for individual options is reflected in the increasing range of investment solutions offering both a high level of personalization and also a high level of sophistication. Clients are, among other things, assigning ever greater importance to effective processes to determine the risk profile and to a larger selection of asset classes. Since established providers cover precisely these requirements, their digital hybrid solutions should be able to profit from this trend.
Accumulation and preservation of wealth, as well as pensions, are primary goals
Across all regions, genders, age groups and categories of wealth, the respondents are pursuing the same investment objectives. The accumulation of wealth (52%), saving for old age (46%) and wealth preservation (36%) feature at the very top of the agenda for the typical Swiss man and woman. They regard investing as a serious matter, with only around 10% stating that they associate investing with fun or speculation.
Around two-thirds of the survey participants invest for a minimum term of five years. Investment horizons are above average in the case of respondents from German-speaking Switzerland, Delegators and members of Generation X. In contrast, the goals pursued by Soloists as well as members of Generation Z (born in or after 1997) are much less long term. Nevertheless, Soloists in particular can imagine also making use of digital offerings to build their Pillar 3 pension savings in the next 12 months. Overall, 22% are also considering digital investments for their Pillar 3a in the next 12 months. It is primarily men, investors with above-average earnings and younger people who are also interested in digital solutions for their pensions.
The study confirms that despite this period of negative interest rates, the average Swiss man and woman envisages using investment savings plans for their pensions. The opportunities offered by the capital market are used primarily by Soloists as well as Validators and members of Generation X. Every fourth person who holds a Pillar 3a account does not know whether – and if so, which proportion – of those pension assets are invested in securities.
Although the study shows that digital wealth management solutions have potential, it also indicates that digital investment solutions are not well known – also when comparing Switzerland with other countries. Only 13% of all survey participants (and 18% of investors) said that they possessed slight to good knowledge of these products.
Rising demand expected
The Institute of Financial Services Zug IFZ of the Lucerne University of Applied Sciences and Arts believes that the demand for digital wealth management solutions will increase in the coming years – driven by the growing range of offerings as well as by the entry into this segment of major market participants with large client bases.
“The study confirms the merits of our strategy of harnessing the power of modern technology to deliver the best possible advice and client service. Digital wealth management solutions such as Vontobel Volt® complement existing services. Further, they provide opportunities to address new wealthy clients who also want to invest themselves and assign a high level of importance to the extensive investment expertise offered by an established investment firm. They also want to have access to a broad digital product offering as well as options for portfolio customization,” stated Toby Triebel, Head Digital Investing at Vontobel.
Vontobel, which launched the digital wealth management solution Volt® in fall 2019, believes that the demand for investment opportunities will continue to grow in the coming years and will thus lend further momentum to digital solutions. “In view of the continuation of low interest rates and the significant need for pensions that is driven by the demonstrably large pension gap alone, investing is becoming the new form of saving for clients who want to generate returns on their capital,” commented Toby Triebel.
“Overall, we expect that these products will increasingly establish themselves as standard offerings at many banks and that volumes will increase accordingly. At the same time, however, such solutions will remain niche products in Switzerland over the next five years in terms of the total investment volume,” stated Dr. Andreas Dietrich, Head of the Institute of Financial Services Zug IFZ of the Lucerne University of Applied Sciences and Arts.
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