Sometimes even the experts are surprised: „We had thought that the growth of neobrokers would slow down. But for the first half of 2024, our data shows that neobroker revenues are continuing to rise steadily,“ Oliver Wyman Partner Philipp Bulis said in an interview with Börsen-Zeitung. Together with his colleagues René Fischer and Marc Erath, he has been compiling the „Online Securities Brokerage“ report since 2020.

The figures in the 2024 report look like this: In aggregate, more than 5 million securities custodial accounts were added in Germany between the end of 2020 and July 2023, an increase of more than 20%. „The brokerage industry now generates annual revenues of almost 2 billion euros, with almost 7 million German investors acting as self-directed investors. Growth is being driven primarily by neobrokers and ETF savings plans,“ Bulis explains.

What also helps on the income side is that brokers generally have agreements with the banks and fund houses that develop investment products and distribute them via the platforms. There are then lump-sum annual payments that can amount to several million euros. However, such inducements have been targeted by EU legislators.

With the support of the Netherlands and Scandinavian countries earlier this year the draft Retail Investment Strategy from the EU Commission stipulated that such agreements should be prohibited for execution-only transactions. In mid-June, however, the European Council removed the so-called commission ban from the final negotiations for the Retail Investment Strategy, but formulated stricter requirements in return.

According to Bulis, in order to document that commissions comply with all applicable rules (few complaints, target market conformity, results from internal audits), brokers must carry out so-called „inducement tests“. This is time-consuming and expensive.

However, this is clearly the lesser of two evils, as the income from inducements is not jeopardised. „This ban on inducements would have hit brokers in the German market, where many derivatives and fund products are traded, hard. For brokers, such inducements often represent 10% to 20% of their income," says Bulis. What remains, however, is the ban on Payment For Order Flow (PFOF), which is to be implemented from mid-2026. According to Bulis, this accounts for a similarly high proportion of revenue as inducements, and PFOF can even account for 20% to 25% of revenue for neobrokers.

What would have a positive effect would be the tax-free custody account planned by the German government. However, it is still unclear whether this project, which Federal Finance Minister Christian Lindner is pushing, can be passed in this legislative period. „The Scandinavian countries have already shown what a boost this would bring. I estimate that the number of self-directed investment accounts in Germany could double to 13 to 14 million with such legislation,“ says the Oliver Wyman expert.

German neobrokers have long since achieved remarkably wide European coverage. According to the Brokerage Report, Trade Republic is the European leader with more than 4 million securities accounts spread across several countries, ahead of ING with a good 3 million filled and active accounts. FlatexDegiro is number three, with 2.8 million customers. It is followed by Etoro (2.6 million). Bitpanda, which specialises in crypto trading, had 1.8 million active accounts at the end of 2023 - and the Austrian company announced at the end of June that it had reached 5 million gross customers in the course of the Bitcoin recovery. With 600,000 active customers (as of August 2022), Scalable Capital is smaller, but is growing fast.