Smartbroker Group successfully completes one of the largest securities accounts migrations in the German financial sector

• More than 75% of customer assets under custody and almost 70% of existing active Smartbroker 1.0 customers have been moved to SMARTBROKER+
• New: Agreement with the previous partner bank for long-term continued support of Smartbroker 1.0 customers who have not moved
• Inactive Smartbroker 1.0 customers will be terminated in the 1st quarter of 2024
• Overall, the migration, the new partnership agreement and the customer cleanup:
  • Secure more than 95% of the economically relevant Smartbroker customer base for the long term
  • Increase pro-forma revenue and cash flow by at least €6 million p.a.
• SMARTBROKER+ is well received by customers.  Earlier this week, Stiftung Warentest, Germany’s authoritative consumer advocacy association, ranked SMARTBROKER+ first among Germany’s full-service brokers

Berlin, 17 November 2023

The Smartbroker Group is pleased with the outcome of the highly coordinated migration of the existing Smartbroker 1.0 customer base to the new SMARTBROKER+ platform. The Group was able to successfully complete one of the largest retail investor migrations in the German financial sector in close coordination with their partners and with the active involvement of their customers. Almost 90,000 customers and more than €5 billion in customers assets were transferred to the new partner Baader Bank AG. This corresponds to more than 75% of all Smartbroker 1.0 customer assets before the move, and just under 70% of active Smartbroker 1.0 clients.

As part of the move, only around 3,000 customers gave up their client relationship with Smartbroker. The management assumes that a similarly high number of customers could cancel in the coming months. Still, this would amount to less than 4% in of the active customer base.

In addition, the management of Smartbroker AG has been able to reach a new agreement with Smartbroker's previous partner bank, DAB BNP Paribas. Smartbroker 1.0 customers who have not yet moved to SMARTBROKER+ will thus have the option to remain on the DAB BNP Paribas platform for the long term, and will continue to be serviced by Smartbroker AG. This means that these existing customers are under no pressure and can take their time to decide whether and when to switch to SMARTBROKER+. However, the Smartbroker branding^[1] will be eliminated and the very favourable Smartbroker pricing and conditions will no longer apply to these customers from April 1, 2024.

The Smartbroker Group is also using the move to cleanse its customer base. As a result, the companies are planning to terminate those Smartbroker 1.0 customers in the first quarter of 2024 who have maintained empty securities accounts in the past, and who have not responded to the request to move to SMARTBROKER+. This affects around 70,000 customers. This adjustment has no material impact on the company's income statement, balance sheet or cash flow. They also have no impact on the customer assets under custody or the number of orders, as these customers are inactive customers without holdings.

Customers of the company's third-party custody account brokerage business, i.e. the FondsDISCOUNT.de and wallstreet:online capital brands, are not affected by the move or the cleansing, and will continue to operate unchanged.

Pro forma increase in sales and cash flow of at least € 6 million p.a. [2]

The combination of the customer migration, the new agreement with DAB BNP Paribas and the streamlining means that more than 95% of the economically relevant base in terms of customer assets under custody and number of trades will be retained by the Group in the long term. The number of customers will fall to a total of around 178,000 due to the elimination of inactive Smartbroker 1.0 customers. These factors and the change in reporting units from securities accounts to client numbers will lead to a corresponding increase in the average performance indicators. For example, the average assets under custody will increase by more than 50% from circa €34,000 per securities account to approximately €52,000 per client. The average number of trades equally increases from 16 per securities account to 24 per client.

As a result of these changes, the management expects a pro forma increase in revenue and cash flow of at least € 6 million p.a., which corresponds to around 12% of the expected Group revenue for the 2023 financial year.

Additional features will soon make SMARTBROKER+ even more attractive

Existing Smartbroker 1.0 clients needed to be actively involved in the move – providing active consent to the opening of their new securities accounts, their new cash settlement accounts as well as undergoing a new KYC legitimisation process. Hence, there was a greater need for information on the part of Smartbroker 1.0 customers than management had initially anticipated. In some cases, this led to long waiting and processing times. The Group tried to quickly prioritise the incoming problems, group them, and addressed them through technical changes as quickly as possible, and also responded with weekend shifts. The number of calls has dropped significantly in the meantime, and the team is working towards normalising availability as soon as possible.

SMARTBROKER+ order numbers are currently at a comparable level to those Smartbroker 1.0, although some important product features are still missing, such as real-time trading and the ability to purchase bonds. In recent weeks, the savings plan offering and access to a total of 16 foreign trading centres, including Switzerland, have been activated ^[3]. RFQ trading and the purchase of bonds will follow shortly [4]. The introduction of securities margin loans and crypto trading are in next year’s product development pipeline. Other workstreams primarily concern the integration of the media offering into the SMARTBROKER+ apps, and the topic of financial education.

Smartbroker Group and Baader Bank celebrate joint milestone

Oliver Riedel, Deputy CEO of Baader Bank, on the transfer of around € 5.4 billion in client assets under custody to SMARTBROKER+: "The move of existing Smartbroker clients to Baader Bank's accounts and securities accounts was a real milestone for everyone involved. A project of such magnitude is truly rare in our industry.  We are therefore all the more pleased that the technical implementation went practically without glitches, and that all customers were able to trade as announced the day after the move. The project also shows how close and trusting the partnership with the Smartbroker Group is, even after a relatively short time of cooperation."

Thomas Soltau, CEO of Smartbroker AG, on the completion of the move: "Together with our partners, we have realised two mammoth projects this year: first, the development of a comprehensive full brokerage product including a new app and, shortly thereafter, one of the largest individual custody account migrations in the German financial sector. Both processes were completed on time. We are particularly proud that – virtually concurrently with the move - SMARTBROKER+ was able to inherit its predecessor market position as Germany’s leading full-service broker with the best value-for-money offering. A comprehensive study of 38 retail brokers was published two days ago by Stiftung Warentest ^[5]. In it, Germany’s most authoritative consumer advocacy association ranks SMARTBROKER+ as number one full-service broker for virtually any type of retail investor. My special thanks go to all our employees who have made this development possible."

^[1] In future, customers will trade via the DAB BNP Paribas front end and see its corporate identity. While there will still be no portfolio fee in future, order fees will be increased

^[2] Assuming ECB policy rates, SMARTBROKER+ customer cash balances and customer trading activity remain at pre-migration levels

^[3] See our press release from 1 November 2023: https://smartbroker-holding.de/websites/smartbroker-holding/German/4999/news-detail.html?newsID=2627811

^[4] Bond sales have been possible for our existing customers since the beginning of November

^[5] Article by Stiftung Warentest (15 November 2023): „Mit Depot-Vergleich Hunderte Euro sparen“ https://www.test.de/Depotkosten-im-Vergleich-4864312-0/