2018 is fast becoming the year when digital investing truly took off, but are we reaching the top of a boom or is there more to come?
Towards the beginning of the year, we produced this explainer piece on the rise of digital investment and how it can be used as an accessible way to get investing online. The months since then have seen the market go on to greater heights. Online investment platforms and robo advisors have been demonstrating stellar growth over the past year, but the rapid rise of Scalable Capital, shows just how hot demand has become.
Scalable Capital becomes a robo advisor market leader
First launched in 2016, in the UK and Germany, it has now hit the €1bn mark in assets under management. This, says the platform, makes it the market leader in Germany. Scalable’s UK CEO and co-founder Simon Miller was quick to point out that the startup’s growth had been faster than the earliest robo-adviser pioneers.
“Our rapid growth shows, above all, there is real demand for digital wealth management,” he said.
Their growth has plenty of similarities to another fast-growing investment platform, Nutmeg, whose assets reached £1bn last year as client numbers and assets under management doubled. This allowed it to claim to be one of the fastest wealth management companies in the world. However, despite the growth, the platform is still reporting losses. It made losses of £9.3million in 2016, up from £8.9million a year before.
A booming market for digital investing
A new survey of senior executives by Boring Money confirms the feeling that the robo-adviser market has big things in store. The survey suggests UK assets could grow by more than $100bn over the next five years. The market currently stands at $200bn but 57% of those surveyed predicted the market to grow to more than £315bn by 2023. More than a third suggested growth might be more modest.
The sector is in healthy shape, but there are clouds on the horizon. The FCA recently turned its attention on the robo-adviser market saying that many had a lot of work to do if they were to fulfil their regulated requirements of providing suitable wealth management advice.
Even so, demand is surging and there is more choice than ever before. Deciding on the best platform, though, will depend on a number of factors. First, it needs to be secure. Online platforms have already been targeted by cybercriminals and any users will have to be fully aware of the risks. Secondly, they will have to be legitimate and reliable. Some providers will be better than others and have differing attitudes about taking care of investor interests.
This is, though, an exciting opportunity. It is opening up the world of trading to an entirely new demographic, who might once have thought this the domain of men in suits. There are risks, but if you choose the right platform and are careful about how much money you invest, this can be an exciting and enjoyable way to put your money to work.
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Tom Cropper is a financial journalist with work which has appeared in titles such as the Guardian, Euromoney and many others.