Transforming Savings into Investments: Digital Wealth Management Solutions and the Appetite of EU Markets

A significant portion of household wealth in Europe remains locked in short-term financial products, while long-term investment avenues are often underutilized. However, the transformation of savings into investments is essential for fostering economic growth, ensuring financial stability, and supporting the transition toward sustainable finance. Digital wealth management platforms offer promising solutions to bridge this gap, but the key question remains: Is there sufficient market appetite for these platforms, and how will they impact asset management strategies? 

Short-Term Products vs. Long-Term Investments: A Market Overview 

Short-Term Products: Reasons for Preference 

Short-term products like liquid assets, deposits, and currency continue to gain favor among European investors. If 46,2% of European household wealth consists of financial assets, the majority (more than 25%)  is held in currency, deposits, and equities. Between 2016 and 2022, households increasingly favored liquid financial products, with currency and deposits growing by 5%, while insurance and pension investments stagnated at 0% (KPMG, 2024). These products are preferred for several key reasons: 

#1 Liquidity and Flexibility 

Geopolitical tensions have heightened market risks, including conflicts in the Middle East, U.S.-China relations over Taiwan, and the ongoing Russia-Ukraine war. In response, investors are shifting toward safer, more liquid assets, reducing demand for long-term investment products. Short-term products offer the flexibility to reallocate funds swiftly in response to changing conditions (Hodula et al., 2024), as investors seek stability and risk mitigation making them particularly attractive in a volatile environment. 

#2 Impact of Inflation and Low Interest Rates  

Following two years of rising prices, inflation in the euro area slowed in 2023 to 2.4% (Eurostat, 2025). This slowdown in inflation and the gradual decline in interest rates have had a significant impact on short-term financial products such as liquid assets, deposits, and currency. As interest rates decrease, the returns on liquid assets like money market funds and short-term debt instruments also decline, making them less attractive to investors seeking yield. Similarly, banks lower the interest rates on savings accounts and term deposits, reducing their appeal and profitability. However, changes in the inflation rate affect the disposable income of households leading to an increase in savings despite lower returns. This shift in consumer behavior results in slower asset growth under management (AuM) as individuals prioritize perceived financial security overspending. 

Impact of Short-Term Products: 

#1 Positive: 

• Short-term products provide stability and liquidity, offering immediate access to funds in uncertain economic times. 

• Investors can hedge against inflation and take advantage of short-term interest rate changes, improving returns in the near term. 

#2 Negative: 

• A reliance on short-term products can result in missed long-term wealth accumulation opportunities. Short-term assets do not significantly contribute to projects or investments that drive long-term economic growth.

• The shift toward liquidity can lead to a lack of investment in infrastructure, sustainability, and other long-term value-generating projects. 

Long-Term Investments: Reasons for Preference 

Despite the growing demand for short-term products, long-term investments continue to play a pivotal role in the wealth management landscape. Millennials and Gen Z exhibit different investment preferences, prioritizing ESG and value-based investments while demonstrating a higher tolerance for risk (Patil et al., 2022). This generational shift is driving demand for both short-term and long-term investment products, thereby stimulating market activity and diversification and digitalization.  

Here are the reasons why investors still favor long-term investments: 

#1 Capital Appreciation and Wealth Accumulation

Between 2016 and 2022, long-term investments such as insurance and pension funds stagnated at a 0% growth rate, highlighting the difficulty in generating significant returns from these products during turbulent times. Yet, equities and investment funds grew by 7% and 6%, respectively, showcasing that long-term assets still have the potential for wealth accumulation over time (Eurostat, 2023). 

#2 Supporting Sustainable Development 

Between 2016 and 2022, long-term investments such as insurance and pension funds stagnated at a 0% growth rate, highlighting the difficulty in generating significant returns from these products during turbulent times. Yet, equities and investment funds grew by 7% and 6%, respectively, showcasing that long-term assets still have the potential for wealth accumulation over time (Eurostat, 2023). 

#3 Risk Diversification and Portfolio Resilience 

While short-term products provide liquidity, long-term investments enable better risk diversification. A well-balanced long-term portfolio includes a range of asset classes, such as equities, real estate, and alternative investments, that can protect against short-term market volatility. For instance, alternative investments like private equity, real estate, and ESG funds have shown significant growth in recent years, increasing by 12% in 2023 (Eurostat, 2023). 

Impact of Short-Term Products: 

#1 Positive: 

• Long-term investments help fund crucial societal needs, such as infrastructure, healthcare, and green technologies, which are key to sustainable development. 

• They offer the potential for higher returns over time, benefiting from compound interest and allowing investors to secure their financial futures, particularly for retirement planning. 

#2 Negative: 

• Long-term investments are more susceptible to risks like geopolitical tensions, market downturns, and inflation. . 

• Due to the relatively long duration required to realize returns, long-term investments may not meet the immediate financial needs of investors seeking liquidity or short-term returns. 

Bridging the Gap with Digital Wealth Management Platforms 

Digital wealth management platforms are emerging as an effective solution to address the challenges associated with both short-term products and long-term investments. These platforms provide greater accessibility, transparency, and innovation in wealth management, facilitating the work of financial institutions to advise their  investors to balance their portfolios across both short-term and long-term assets. 

#1 Enhanced Accessibility and Cost Efficiency 

Digital platforms lower the barriers to entry for investors by reducing traditional advisory costs, enabling more people to participate in both short-term and long-term investment opportunities (Tay et al., 2022). The rise of fintech and tech-driven investment platforms has led to increased competition, driving down fees, expanding access to various products, and stimulating innovation. This is particularly valuable for financial institutions, as more and more investors look for cost-effective ways to diversify their portfolios and maximize returns. The platforms also provide real-time data, enabling investment advisers to offer their investors the opportunity to make informed adjustments to their portfolios quickly and efficiently.  

#2 Increased Engagement Through Personalization

Moreover, these personalized solutions align well with the preferences of younger generations, such as Millennials and Gen Z, who demand more tailored, accessible, and flexible investment options. These generations value digital solutions that provide control, transparency, and ease of use, making AI-powered platforms a perfect fit for their expectations in wealth management. 

#3 Tokenization and Digitalization of Long-Term Assets 

Digital platforms are playing a vital role in the tokenization of traditionally illiquid long-term assets like real estate, private equity, and infrastructure investments. Tokenization makes it possible to trade fractional ownership of these assets, offering greater liquidity and accessibility. This trend is reshaping how investors interact with long-term assets, facilitating diversification into markets previously difficult to access (Boggio, 2024). 

Final Thoughts 

Both short-term products and long-term investments have critical roles to play in the wealth management space. Short-term products offer immediate flexibility, liquidity, and safety, but they do not contribute significantly to long-term economic growth. Long-term investments, while carrying higher risks, provide significant opportunities for wealth accumulation and sustainable economic development. 

The rise of digital wealth management platforms is helping bridge the gap between these two types of investments. By enhancing accessibility, reducing costs, and leveraging technologies like AI and tokenization, these platforms are making it easier to diversify portfolios between  short-term and long-term assets. As these digital platforms evolve, they provide the necessary tools to enable investment advisers to balance their client’s immediate liquidity needs with their long-term growth objectives. 

In the broader context, this transformation is not only about individual investors gaining access to better financial products but also about addressing important societal needs. We are witnessing an increasing demand to finance societal challenges, including the transition to sustainability. There is a vast amount of money currently sitting in bank accounts, which could be redirected into the real economy—helping to fund the future of infrastructure, green technologies, and social development. As more capital flows from bank accounts to investments in the real economy, we can expect a substantial positive impact on both financial markets and society. 

Sources:  

Mügge, D. (2024). Widen the market, narrow the competition: banker interests and the making of a European capital market. ECPR press. 

Eurostat. (2023). Database - Eurostat. Ec.europa.eu. https://ec.europa.eu/eurostat/web/main/data/database 

Eurostat. Households - statistics on financial assets and liabilities - Statistics Explained. (2025). Europa.eu. https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Households_-_statistics_on_financial_assets_and_liabilities 

Eurostat. (2025, January 7). Euro area annual inflation up to 2.4%. Europa.eu; Eurostat. https://ec.europa.eu/eurostat/web/products-euro-indicators/w/2-07012025-ap 

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Hodula, M., Janků, J., Malovaná, S., & Ngo, N. A. (2024). Geopolitical risks and their impact on global macro-financial stability: Literature and measurements (No. 9/2024). BOFIT Discussion Papers. 

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Olawale, O., Ajayi, F. A., Udeh, C. A., & Odejide, O. A. (2024). RegTech innovations streamlining compliance, reducing costs in the financial sector. GSC Advanced Research and Reviews, 19(1), 114-131. 

 Boggio Viola, A. (2024). The Tokenization of Assets: Analysing the Emergence of a New Market Trend (Doctoral dissertation, Politecnico di Torino). 

 KPMG. Personal communication, October 2024.