Name
Global FinTech Guide
Country _ Name
Germany
SectionTitle
Financial advisory and broking services including robo advisory and auto-trading
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FinTechs belonging to this category offer advisory and broking services for investments usually via an internet platform.

Robo advisory services usually offer an investment proposition following a series of questions concerning the personal financial background and the risk-bearing capacity of the user. Sometimes the respective platform also enables the user to directly execute the proposed investment. 

Auto-trading concerns all services which automatically trade on behalf of the customer according to his or her specifications.

Apart from that some FinTechs collect and offer merely or as an ancillary service market information or operate comparison portals to increase the transparency of the capital markets and to help the investor with his decision-making.

There are also FinTech-advertising-services which advertise various financial services or products.

Introduction

Attitude of the country towards modern financial advisory and broking services

The German market for financial advisory and broking services is evolving rapidly, closely linked to areas such as (crowd-)investing and portfolio management. Approximately 1.2 million users engage with personal financial management tools, signaling increasing acceptance of digital solutions. Automated advisory services and robo-advisors are among the fastest-growing segments, driven by innovations in cloud computing, IoT, advanced analytics, and artificial intelligence (AI). These technologies enable more personalized, efficient, and accessible financial advice and broking services for a broader audience.


Legal affairs

Obligations and requirements to provide financial advisory and broking services, or ancillary services described above

Consulting, broking, robo advisory and auto-trading services are financial services activities in the form of investment advice, investment or contract broking or portfolio management governed by the German Securities Institutions Act (Wertpapierinstitutsgesetz – WpIG) and, as the case may be, the German Banking Act (Kreditwesengesetz – KWG). In addition to WpIG and KWG, the EU-wide Regulation (EU) 2019/2033 on the prudential requirements of investment firms from 27 November 2019 (Investment Firms Regulation – IFR) as well as anti-money laundering and data protection regulations are to be complied with. The WpIG derives from the Directive (EU) 2019/2034 on the prudential supervision of investment firms from 27 November 2019 (Investment Firms Directive – IFD).

According to WpIG and KWG, offering investment advice or investment or contract broking requires a license in cases where the investment firm is granted a broad discretionary power to make decisions on behalf of the client. Whether WpIG or KWG provisions apply depends on the scope of business. KWG applies in cases of more than EUR 30 billion on their balance sheets on monthly average in the last 12 months and the conduction of issuing business, proprietary trading, or proprietary business. In all other cases, WpIG applies.

License costs depend on the specific business model and result from fixed and time spent costs. Fixed costs are typically in the range between EUR 3,262.00 and EUR 10,114.00 and additional time spent costs depend on the complexity of respective business model.

Among other things, particularly sufficient initial capital consisting of Common Equity Tier 1 capital (CET1) available in Germany is required to obtain a license. In case of investment advice, investment or contract broking or portfolio management, where the service providers, in providing financial services, are not authorised to obtain ownership or possession of funds or securities of customers and who do not trade in financial instruments for their own account, an amount equivalent to at least EUR 75,000.00 in CET1 is required.

When offering financial advisory and broking services and the KWG applies according to aforementioned requirements, the service providers are to comply with requirements for the initial capital, as well as with the funds requirements at all times. According to Art. 92 Regulation (EU) No. 575/2013 (Capital Requirements Regulation – CRR), these are: a CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6%, a total capital ratio of 8% and a leverage ratio of 3 %. When calculating the capital ratios, the fixed overheads of the respective financial service providers have an important impact.

Additional comments regarding the legal situation for financial advisory and broking services, or adjacent services or what FinTech’s must be aware of in this business area

A license is not required, where consulting, broking, robo advisory and auto-trading services are organised in a way that they don't meet the requirements for investment advice, in-vestment or contract broking or portfolio management services.


Economic conditions

Market size for financial advisory and broking services as well as adjacent services and biggest companies in this business area

The number of users in the 'Robo-Advisors' segment of the FinTech market in Germany is expected to rise steadily between 2024 and 2028 by 12.8 thousand users (+4.94%), reaching approximately 271.67 thousand users in 2028. This growth follows a strong earlier phase between 2013 and 2019, during which the segment grew by an average of 318.5%. The market has since matured but continues to expand. Among the most prominent players in Germany's robo-advisory space are Scalable Capital, Quirion, and VisualVest.

Additional comments regarding the economic situation for financial advisory and broking services as well as adjacent services or what FinTech’s must be aware of in this business area

Global investment in FinTechs fell to its lowest point since 2017 in 2023. However, German venture capitalists have shown increased activity since 2022, with domestic investors accounting for a record 38% of deal volume in the fourth quarter of 2023. This surge was likely supported by strong fundraising efforts in 2022, leading to a greater supply of domestic capital in 2023. Following a downturn in 2022, the FinTech sector has shown signs of strong recovery, accounting for the largest share of startup deals in Germany in 2023 at 12%.



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