From 2023 to 2024: Key industry trends and predictions from Upvest experts

With 2023 coming to a close, here at Upvest we want to take a moment to reflect on the significant trends that we saw shape the industry this year and share our top experts’ insights into what we anticipate for 2024.

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2023: Retail investor flows continued to increase

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Retail investing is expected to be a €20tn AuM market by 2030¹. Since 2020, there has been a steady increase in the share of retail investors, with 1 in 4 equity trades done by a retail investor in 2021, nearly doubling the volume from a decade ago². Concerns over the rising cost of living and inflation have triggered many to save more. However, 60% of respondents claim that saving may not be enough on its own and they need to invest more to make up for inflation³.

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This trend in ever-increasing participation in public markets continued in 2023, hitting an all-time high for weekly inflows as $1.5 billion poured into the market in a single week in February 2023⁴.

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Tobias Auferoth, co-founder and MD at Upvest, notes: “Fintechs and financial providers alike share a mission to democratise investments and make investment opportunities available to all. This increased accessibility, as well as lower barriers to entry (e.g. investing as little as €1) are instrumental in rising inflows of new investors who are taking their first steps into the world of retail investments.”

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2023: Personalised experiences gained even more popularity

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Personalised investment experiences are increasingly being favoured, as 81% of investors want the ability to customise their investments to match their personal values⁵. Personalisation can refer to a few factors - from tailoring a portfolio to fit existing investments, maintaining a specific investing approach, or relying on personal values to drive investment decisions.

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The number and popularity of portfolios have increased over the last decade, witnessing a 22% yearly increase to an estimated $349 billion (2022)⁶. This is not surprising given the numerous benefits of portfolio investing, such as diversification of risk, personalisation of investments based on risk appetite, and steady wealth creation over time.

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Juha Ristolainen, CTO and co-founder at Upvest, shares his insights: “The rise in personalised portfolios at scale is driven by customer demand, but is only possible due to advances in technology such as Upvest’s Investment API. Automation, digitisation, and process streamlining make it possible for financial providers to reduce their costs while delivering a superior customer experience.”

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2023: ETF share of portfolio on the rise

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During the first half of 2023, ETF share of portfolio AuM increased 4.4x year-over-year⁷. ETFs offer advantages for institutional and private investors alike - from low cost and ease of diversification to high flexibility and increased accessibility for all investors. 

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The high demand for ETFs is also reflected in the rising number of ETF savings plans, with Germany accounting for 7.1 million ETF savings plans thus making it the biggest European ETF market⁸. This trend of increased demand for ETFs will likely continue, as estimations claim that by the end of 2028, the total volume invested in ETFs in Continental Europe will more than triple to over EUR 650 billion⁹.

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On a global scale, research by PwC claims that a projection of over $20tn ETF AuM can be achieved globally by 2026¹⁰, driven by increased transparency, higher availability, and lower costs.

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Christian Wöhlke, VP Product at Upvest, elaborates: “ETF saving plans are often the gateway for customers entering the world of capital markets. As the demand for easy-to-navigate investment products increased, ETFs gained a wider popularity and market share.”

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2024: High rates and demand for safe assets

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As we approach 2024, market turbulence and high interest rates will continue to have a growing influence on investment decisions. Investors are keenly attuned to interest rate movements, as they directly influence yields on savings accounts and investment products. And market volatility and macroeconomic risks keep everyone on their toes. 

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Many retail investors are eyeing financial instruments offering high liquidity and low levels of risk, such as bank deposits, Money Market Funds (MMFs), or bonds. Investors are already holding significantly more cash in 2023, as J.P. Morgan reports that its clients have added $120 billion to MMFs, Treasury bills, and other short-term fixed-income investments¹¹. Retail investment platforms are increasingly bringing rates into the (product) mix with target date funds and innovations such as fractionalised bond investing.

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Til Rochow, co-founder and CPO at Upvest, says: “In 2024, interest rates will stay in the focus of retail investors. Investment platforms should aim to be leaders, not laggards in launching good fixed income products to ride this wave of the interest rate cycle.”

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2024: New portfolio mix

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As the investing landscape evolves in 2024, the industry is likely to witness a change in the composition of portfolios. A resurgence of bonds can be expected, as investors’ appetite for risk and portfolio diversification shifts.

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This change in portfolio mix could be fueled by a variety of factors, such as higher interest rates and a historic rise in bond yields globally making bonds more competitive^{12 13}.

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Martin Kassing, co-founder and CEO at Upvest, shares: “Retail investors will continue to take advantage of the most attractive investment opportunities based on their risk tolerance and investment goals. As bonds continue to gain momentum, there will be a clear shift in the portfolio mix.”

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2024: Goal-based investing

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Automated investing (e.g. via savings plans) is expected to continue to gain popularity in 2024 and beyond. It offers an opportunity to invest small amounts over a prolonged period of time and contribute towards a specific financial goal.

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For example, retirement income is the #1 most frequently mentioned reason for investing in Germany (50%), the UK (48%), and Japan (52%) in 2023¹⁴. Whether it is to supplement their retirement provision or other personal goals, more and more investors are taking advantage of savings plan investments as a low-cost and low-risk option to profit from passive investing. 

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Konstantin Kotulla, Director Growth at Upvest, says: “Goal-based investing via savings plans is a “must have” not a “nice to have” for any investment offering. We are witnessing a growing interest amongst fintechs, banks, and other financial institutions in providing a comprehensive and cost-efficient investment offering. The need to upgrade the underlying investment infrastructure to efficiently offer use cases such as saving plan investments will redefine the industry in 2024 and beyond.”

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New year, new opportunities

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As we approach the end of 2023, we have observed several significant trends in the world of finance. Retail investor participation continued to increase, and this upward trajectory is expected to continue, with retail investing projected to reach a €20tn AuM market by 2030. Personalised investment experiences gained popularity and drove demand for tailored portfolios, while ETFs saw a 4.4x YoY increase in share of portfolio AuM.

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Looking ahead to 2024, the industry can anticipate growing interest in safe assets like bonds and an increased focus on goal-based investing. Market dynamics and interest rates will have a continued influence on financial decisions and will shape the investment landscape.

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As we move into 2024, these trends will provide new opportunities for investors and financial service providers alike. If you want to stay ahead of the curve and future-proof your investment offering in 2024, get in contact with our experts today:

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Disclaimer: The content provided in this article is intended for educational and informational purposes only and should not be construed as financial or investment advice. Always conduct thorough research and seek professional guidance before making any investment decisions. The past performance of any investment does not guarantee future results. ‍

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Sources:

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1. Calculation based on data from Eurostat

2. Public: The Retail Investor Report (2023)

3. Natixis: Global Survey of Individual Investors (2023)‍

4. BNN Bloomberg: Retail Army Bets Record $1.5 Billion on Stocks at Fastest Pace Ever, JPMorgan Says (2023)

5. Natixis: Global Survey of Individual Investors (2019)

6. Morningstar: Model Portfolio Landscape Report (2022)

7. Public: The Retail Investor Report (2023)

8. iShares by BlackRock and extraETF: The ETF Savings Plan Market in Continental Europe (2023)

9. iShares by BlackRock and extraETF: The ETF Savings Plan Market in Continental Europe (2023)‍

10. PwC: ETFs 2026: The next big leap (2021)

11. J.P. Morgan: Outlook 2024 Investing Reconfigured (2023)

12. J.P. Morgan: Outlook 2024 Investing Reconfigured (2023)

13. Bloomberg: Goldman Sees Bonds Beating Cash for the First Time Since 2020 (2023)

14. Avaloq Investor Survey: The five dimensions of investor behaviour (2023)