Robo advisors in Germany

My life use to be simple. I had just enough money to get by until the next paycheck, furiously wasting it on too many parties or too many trips. Although there were tough times, it was simply about surviving the next few weeks or few months.

I am now a father of two three, with a steady income, generating enough cash to spare and think about the future. It is time to think about where to put that extra income for a long-term investment. If you have landed on this page, you have also probably thought about investigating robo advisors in Germany for that purpose.

This is what I learned along the way.

Feel free to skip the general introduction on robo advisors. Happy to answer your questions too.

What are Robo advisors

A robo advisor a technology-heavy alternative to trade stocks and commodities yourself in Germany, or to hire a financial advisor to do that for you, all of that at costs usually contained below 1%.

An algorithm is managing your portfolio of assets, automating as much as possible, in order to cut costs.

Robo advisors in Germany are offering to do that by diversifying the portfolio you will automatically acquire over time. This is done mostly through ETFs (Exchange Traded fund), a package of stock and bonds. Based on your risk profile, it will also do a risk re-balancing for you, in case your portfolio deviates from your target.

ETFs also participate to reduce costs because it’s cheaper to trade than commodities or bonds at 0,30% in most cases.

In my particular case, thinking about robo advisors in Germany is simply a consequence of my retirement planning strategy. I don’t want to beat the market, i don’t want to engage in short-term equity or stock trading. I want to simply match the average market performance, with as little costs as possible, with a set and forget approach. It’s all about distributing risks. That is exactly what robo-advisors can do for me.

Very famously, the legendary Warren Buffet said that “not beating the market” was the best approach for the average investor. So someone like me, someone like you too.

Warren Buffet explaining to Barack Obama how to use ETFs. Source

To be clear, i will not rely exclusively on ETFs to reach my long term goals but i think they are solid foundation. I also plan to have real estate into the mix and maybe some more traditional products

Who is Robo advisors for? In which case is it relevant?

Robo advisors are made for people who are comfortable trusting an algorithm, who wants a low-commitment option with a reasonable return for the risk involved. There is also often not minium investment sum to begin with. In a nutshell, it’s great for total beginners.

It’s quick to set up because most robo advisors in Germany will ask you a few questions to define your profile, based on age, family situation, income target and use of the money invested.

Robo advisors are not made for people use to do day trading on the market, trying to be ahead of the curve. It’s not for people who are looking to speak to a real human, for advice on wealth management in general. If you are able to trade ETFs yourself and able to rebalance it once it a while, then probably don’t sign up for one.

It’s also probably not for people who would like to learn more about trading, as every decision is automated, taken off your hands so to say.

The main robo advisors in Germany

ProviderActively managed? FeeMinimum initial depost
Scalable CapitalYes0.75%10,000 €
Whitebox Yes0.75%5,000 €
quirionYes0.48%10,000 €
Liqid Yes/No0.50%100,000 €
fintego No0.45%2,500.00 €
Growney No0.39%500€

Robo advisors are fairly new animals in the land of Goethe, so it has taken time for them to do well in the tests conducted by heavy weights like the Handelsblatt and the almighty Stiftung Warentest.

What to watch out for?

Like for all investments, money is not guaranteed at the end of the day. The forecasts they give are only forecasts. But remember; time on the market beats time to market; we are here on the long-haul, through ups and downs.

Time in the market beats timing the market

A common say about ETFs traders.

If there is a hard hit and your robo advisor goes bankrupt, make sure that your money is insured/backed by another bank. And of course then, there are costs.

How to deal with taxes

There are 2 main things to know:

First, ETFs funds are treated as any other investment in the eyes of the Finanzamt, so there will be tax on the returns too when you take the money out. You would document your earnings via the form “KAP” for your tax declaration. This simulator lets your calculate what you will owe at the end of the year if you take the money out.

Second, Robot advisors are reinvesting the dividends you made back in your ETF funds directly, not paying out any dividends to you. This sort of behavior is also partially taxed by the Finanzamt. It’s called “Vorabpauschale” (Preliminary lump sum) as defined by InvStG § 18. Simply put, it works like this since 2019:

  • As the name “ preliminary lump sum” suggests, this is a lump sum that is due in advance . The Finanzamt simply doesn’t want to wait until you sell your shares, fund or ETF shares.
  • The amount of the preliminary flat rate is calculated by first determining the basic yield. This basic yield is a yearly value set by decree depending on the market performance. Anything above that basic yield is taken into account. In 2020, it was 0,07%. In 2022, it was -0,05% (not tax is due).
  • Fortunately, the preliminary lump sum is not the amount to be paid, but the basis for assessing the capital gains tax .
  • Your bank or robot advisor is responsible for paying this lump sum out: you don’t have to do anything.

More details in German here.

Robo advisors in Germany for retirement

If you are investing in ETFs for retirements sake, you can make use of the so called Rürup Rente scheme, which allows to put up to 88% of your investments off in taxes (up to 24 000€ per year), when concluding a contract with a government-certified institution. There is only one provider that fits the bill in Germany (putting together Rürup and ETFs), that is Fairr/Raisin.

My experience with robo advisors in Germany so far

After looking at the different options, I decided to open an account with Growney, essentially because of its low fees, interface & barrier to entry.

I have been fairly happy with the experience so far:

  • Signing up was easy but required some back & forth for ID verification. There was a little hick-up on the way. Since Growney is trading american commodities, I had to fill-in some anti-money form for the American authorities (pretty weird).
  • Onboarding & picking the risk profile was well done. It never felt forced but rather a well-meaning guidance.
  • Interface is clear & modern.
  • I regularly get nudges via email with tips to educate myself as an investor.
  • Customer service is responsive & helpful.
  • It automatically generated the right documents for the tax declaration with the Finanzamt.

This is my performance so far (-3,77% in June 2022). With the current economic conditions, I’m not too worried as it follows market trends. It was doing fine until oil, inflation & food prices started to increase a lot in early 2022. And of course, the invasion of Ukraine has had an effect.

Black line the amount invested, and the blue chart is the appreciation/depreciation.

Please note that this page is work in progress and that it dont esn’t constitute financial advice. If you plan to put money away, talk to a licensed professional.

Sources: 1, 2, 3, 4, 5, 6

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