ETF Wrap: ETFs Rush to Retail

LONDON − Retail is undoubtedly the next distribution battleground for ETFs in Europe as large asset managers clamour to offer access to single ETFs and ETF savings plans via investment apps.

After making a series of investments in German neobroker Scalable Capital, BlackRock doubled down on seeking out online platforms to house its ETFs, this week partnering with Amsterdam-based wealth platform Bux to launch ETF savings plans across eight European countries.

The plans are based on iShares ETFs and are available in the Netherlands, Belgium, Italy, France, Spain, Austria and Ireland, with a minimum investment of €10 a month and €1 commission per trade.

Scalable Capital, whose products also incorporate iShares ETFs, said it reached one million ETF and stock savings plans in January, with 90% of its client assets invested in ETFs.

Elsewhere this week, legacy provider M&G Wealth partnered with Moneyfarm to launch &me, an investment platform offering six portfolios partially or wholly based on passive equity and fixed income ETFs.

Earlier in the month, Vanguard expanded its German retail offering. After launching its Vanguard Invest Anlageservice for advised index fund investments last February, in January this year it began offering self-directed ETF investments through Vanguard Invest Direkt.

This came in the same month the passive giant told ETF Stream the share of its UK assets housed in ETFs jumped from 9% in 2017 to 20% in 2022, following the launch of its self-directed UK Personal Investor (UKPI) platform.

The slew of recent announcements seem to indicate a very clear direction of travel for ETF distribution in Europe.

While retail usage started from a low base in the pre-pandemic era, private investor appetite for low-cost, passive, diversified investment has brought a growing number from legacy providers to savings plans, often using low-cost building blocks such as ETFs.

Wise to this, neobrokers, asset managers, robo advisers and even banks are jumping at the opportunity offered by ETFs.

January saw the UK’s oldest DIT platform, Hargreaves Lansdown, launch multi-asset funds based on ETFs; however, they carry high costs of 0.92% to 0.99% in addition to the provider’s 0.45% platform fee.

Last November, Trade Republic added an additional 1,000 ETFs to its platform, taking its total ETF offering to 2,400 products from issuers including Vanguard, Invesco and VanEck.

In recent years, Franklin Templeton has also partnered with Directa in Italy and JP Morgan Asset Management acquired Nutmeg, which is soon to be integrated into its Chase retail banking app.

BlackRock now anticipates digital platforms in Europe will house €500bn in ETFs by the end of 2026.

The End of Retrocessions Within Sight?

Elsewhere, European Commissioner for financial services, financial stability and the Capital Markets Union said the regulator is having discussions about whether retrocessions – or inducements – have any positive impact on the quality or cost of financial advice.

McGuiness noted retail investors are often advised to buy costly and suitable products when inducements are involved and these products are on average 35% more expensive for retail investors than products that do not charge retrocessions.

“Inducements can lead to conflicts of interest that can have a negative effect on the quality of investment advice,” McGuiness said. “Low-cost products, like exchange-traded funds, are hardly ever recommended.”

She continued and said the question needs to be asked whether commission-based advice works in the interest of retail investors.

“It is good to grab this nettle and to make change for the better,” she concluded.

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