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Online broker DeGiro has been successful with its low cost, world-wide investment approach - so much so that it has been forced to introduce a waiting list for new clients. Digitalisation, says CFRO Peter Verberne, is at the heart of the company’s strategy.
Even before COVID-19 hit the Netherlands, DeGiro had been welcoming an enormous number of new clients. But since the crisis, the number of potential investors has soared, as savers and others decide the time is right to benefit from falling share prices and make their money work for them. DeGiro’s low costs and no-nonsense approach proved to be a popular choice among those entering the market. As a result of the significant influx of registrations, the company had to implement a temporary waiting list. The DeGiro story dates back to the beginning of 2013 when a couple of former BinckBank workers decided to build a brand from the ground up. They profiled the company as a pan-European broker from the start, offering the fees and services to private investors that were usually restricted to professionals. To put it simply, it was a ‘make money through mass sales’ strategy. Within no time, DeGiro was active in 18 European countries and has managed to cream off a slice of market share from traditional banks and the likes of Alex and BinckBank, which both started off as price fighters but are now part of the established order. DeGiro now offers trading on more than 50 stock exchanges worldwide and has over 600,000 clients.
You used to work for established players like ING, NN and Delta Lloyd Bank. Why did you make the switch to a relative newcomer?
Peter Verberne: ‘DeGiro offered me a different role within Financial Services. Two years ago, DeGiro began scaling up, with more emphasis on risk management. I was used to working in departments where I had complete oversight but now, I am CFRO of an entire company, one that is growing quickly. This sort of operation gives you the maximum potential to contribute, and I feel totally at home.’
Your trading platform stands out for its simplicity. What is the reasoning behind it?
‘Keep it simple, no fuss. So, no newsflashes, webinars or promos for training courses within the platform where the client can check his or her portfolio. Clients should be able to see how their investments are doing at a glance. We have expanded our products over the years and it is now a pretty broad range. This means clients can build up a very diversified portfolio and spread their risks.’
Peter Verberne (1974) After completing his studies in technical business administration, he started his career at KPMG. In 2007, he was appointed Head of Business Control & Regulatory reporting at ING’s property arm. He then worked as Chief Financial and Risk Officer at NN, Argenta and Delta Lloyd Bank. At the beginning of 2018, Verberne joined online broker DeGiro as CFRO.
Do you facilitate going short, allowing investors to trade in borrowed shares?
‘Investors have to take an appropriateness test before they get access to more risky investment products such as options, turbos and other derivatives. But we do keep an eye on things as well. For example, we monitor that our clients don’t take too much leverage on structured products to keep a lid on the risk.’
Do you advise your clients, whether they ask for advice or not?
‘DeGiro has always operated an execution-only model, which means we only place our clients’ orders. The investor operates independently in the financial markets and does not get advice from us. But we do have a gatekeeper’s role, by testing our clients’ knowledge before they get started. And we have made a cautious start in offering some support to clients when they are making their investment decisions as part of our wider service provision.’
How important is digitalisation?
‘It is at the core of what we do. We have a lot of highly qualified mathematicians working for us, many of them coming from outside the Netherlands. They can programme and they know how to use algorithms. Our data scientists analyse client search patterns. Do clients scroll through a programme in a natural way? Do they get stuck? We use data analysis continuously to further refine our platform.’
As CFRO, what does the digital transformation offer you, specifically?
‘A lot. I have dashboards at my disposal to follow our results in real-time and I can do this per country, per product, etc. And when it comes to risk management, we could not be without digitalisation. If a client has gone in hard on a particular strategy, but the market moves in the other direction, then the client might have to put in more funds or reduce his or her risk. Our approach to risk management is very conservative, so we protect our clients as well as ourselves. In some cases, we may have to liquidate a part of a client’s portfolio. We work with an advanced margin model that we developed ourselves. In fact, we develop almost all our software apart from our bookkeeping package, which is provided by Wolters Kluwer.’
‘Keep it simple.
Clients should be able to see how their investments are doing at a glance’
Do you do the developing in house?
‘Mostly, yes, but we do use external specialists for very specific tooling. For example, the registration process for clients requires a specific tool. I know our programmers could build it, but it would take a fair amount of time and that would not be efficient. So, we contract this out. Of course, our programmers understand how the tool works so they can make adaptations if necessary.’
What digital technology is going to be most useful to DeGiro in the coming years?
‘We are now taking our first, cautious steps using blockchain technology. Security is crucial in our sector and we are trying to find out if blockchain can be used to increase security while reducing risk. We are also using AI to better understand our clients’ behaviour. It is an on-going project, particularly when it comes to complying with privacy legislation. But it is a field in which there is a world to win. The better we understand what makes our clients tick, and why they invest as they do, the better we can provide the appropriate service.’
DeGiro is being taken over by German online broker Flatex. What does this mean to you?
‘Flatex has a banking license that DeGiro will be able to make use of. DeGiro currently falls under the supervision of the AFM financial services regulator and the Dutch central bank, and it has a permit to operate as a broker, but not as a bank. With Flatex, we will be able to expand our services more easily into regular bank products such as current accounts – if we consider such a move would be appropriate.’
What are the advantages of this alliance?
‘For a start, we are creating advantages in terms of purchasing and IT optimising. Flatex has a strong presence in Germany and Austria while we are big in the rest of Europe. They have less experience in other countries, and they want to learn from our expertise. We complement each other and the plan is to offer both brands in parallel. I think we have a bright future ahead of us.’
Sector: Online broker | Clients: over 600,000 | Workforce: 340 fte | IT/digital team: 80 fte Countries active in: 18 | Turnover 2019: €60 million | Net profit 2019: €8.5 million
Read more inspirational cases in our special FINANCIALS IN TRANSITION
The CTO's of leading financials such as ING, ABN AMRO, Rabobank and AEGON give insights into their own, unique approach to digitalisation. And discover how BDO's integrated approach makes the most of the opportunities which digital transformation can bring.