Banks envision $ 1.8 billion microinvestment market

But the big banks have fallen far behind, with Commonwealth Bank being the only bank to enter the market with the launch of CommSec Pocket in 2019. The app, which gives investors access to a portfolio of seven traded funds listed on the ASX for as little as $ 50, has attracted 280,000 clients (80% of which are under 40) and $ 360 million in funds under management since its inception.

Now, other majors are eager to taste it, says Cache, an “investment as a service” player that provides back-end infrastructure to several local micro-investors.

“We are currently negotiating the launch of microinvestment products for several retail banks in Australia,” said Cache founder Caleb Gibbons, former financial services lawyer at Minter Ellison.

“Banks tell us that they see transactions from their accounts to fund micro-investment platforms. It is a market that they cannot ignore.

“Be very carrefully”

The National Australia Bank did not respond when asked if it was among the banks in discussions with Cache, but the bank’s head of self-directed wealth management, Adrian Hanley, confirmed that it was interested in the market.

“We pay particular attention to developments in the microinvestment arena and how we support newbie investors, especially around ETF growth through our Nabtrade platform,” said Hanley. He highlighted the launch of the Nabtrade Academy, a financial content and education portal for the new generation of investors and traders.

Westpac declined to comment on the Cache report, but it operates a low-balance investment product, BTInvest, with do-it-yourself or off-the-shelf portfolios available starting as low as $ 1,000.

However, measures relating to the adoption of BTInvest have not been made public and it is one of several companies under the BT Financial Group banner for sale as part of the bank’s exit from the sector of wealth management from the Hayne Royal Commission.

ANZ – which last month sold its equity trading business to CMC Markets for $ 25 million and is furthest along in its exit from the wealth market, with the sale of its financial advice and retirement assets to IOOF as of 2018 – also chose not to comment.

The exit of the four big banks, to varying degrees, from the activity of wealth management was seen as an obstacle for them to experiment with micro-investment and, in particular, robo-advice – which involves real recommendations from portfolio and, in Australia, requires a license to provide personal financial advice.

But the Cache report argues that UK banks followed a similar path after their retail distribution overhaul reforms, which Cache said was analogous to the royal commission in its disruption of the market.

“This disruption has seen several major UK banks exit the financial and wealth advice market after receiving heavy fines,” the report said. “However, these banks have come back in recent years targeting a broader customer base.”

Mr Gibbons said local banks will follow suit once they extricate themselves from the troubled business of comprehensive financial advice and the regime of extreme regulatory compliance it unleashes.

“For a bank, micro-investment allows them to meet their clients’ need to develop their wealth over time without the costs, risks and complexity of running a financial advisory or management business. heritage, ”he said.

An ABC spokesperson said the bank sees Pocket’s deployment as a “success” and is now considering adding more underlying investments beyond the original product’s seven ETFs.

Unlike the other three majors, CBA will remain a major investor in the wealth management market as a 45% owner of Colonial First State after selling the controlling stake to KKR later this year.

The spokesperson said the bank “continues to assess” whether the functionality of the robotic advisory product could be a suitable addition to the CommSec trading business or the Pocket app.