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BlackRock has joined forces with the neobroker Bux to offer low-cost savings plans that use exchange traded funds in a push by the world’s largest asset manager to encourage more retail investors across Europe to adopt ETFs.
Investors will be able to build investment portfolios of up to 10 BlackRock iShares ETFs in a so-called savings plan that will cost a flat fee of just €1 per month on the Bux platform. Investors will be able to make portfolio trades that can adjust the allocations across all of the ETFs they hold for a €1 commission fee and the minimum required investment has been set at just €10 per month to appeal to younger savers.
The Bux ETF savings plan will be launched in eight countries — the Netherlands, Belgium, Germany, Italy, France, Spain, Austria and Ireland — on January 31.
The initiative shows how the cut-throat price war over ETF fees is spreading into other areas of financial services, such as savings plans and transaction costs for fund trading.
Thirty providers of ETF savings plans in Europe use BlackRock’s iShares with a growing number of banks and online brokers seeing a significant acceleration in ETF adoption by retail investors on digital investment platforms. About 3.1mn savings plans that use iShares ETFs have already been established and BlackRock is predicting that 10mn new investors across Europe will starting buying ETFs via digital investing channels over the next five years, creating a new pool of assets that could be worth €500bn by the end of 2026.
Yorick Naeff, chief executive of Bux, said that the new ETF savings plans would appeal to younger or less confident investors that might feel daunted by their lack of experience or knowledge of financial markets.
“By joining forces with BlackRock, we have created a good solution for clients that are overwhelmed by the choice of products and don’t know how and when to start investing,” said Naeff.
Christian Bimueller, BlackRock’s head of digital distribution in continental Europe, said that the new partnership with Bux would “create an efficient way for investors across Europe to reap the benefits of ETFs and invest in global markets in a simple, accessible and cost-efficient way”.
Germany, which already has about 5mn ETF savings plans, according to BlackRock, has emerged as one of the key battlegrounds for new investors’ money. DWS, the asset management arm of Deutsche Bank, and Vanguard, the world’s second largest asset manager, have also signed up distribution partners to entice interest from retail investors.
Trade Republic, the German online broker and another of BlackRock’s distribution partners, expanded into 11 new European countries in October, showing how the model of using ETF investment plans to appeal to retail investors is spreading rapidly across Europe.
Until now, investment flows and trading activity in Europe’s $1.4tn ETF industry have been almost entirely dominated by large institutional players, unlike the US which has attracted far higher levels of participation by retail investors.
But some top European regulators believe that encouraging more retail investors to use ETFs instead of actively managed mutual funds could lead to better returns for consumers.
Mairead McGuinness, the EU’s financial services chief, has expressed support for a ban on inducements that are paid to financial advisers by asset managers for recommending a product to a client. ETF providers do not pay these inducements, which are also known as retrocessions, to financial advisers. The absence of any financial incentive for an adviser to recommend an ETF to a client is widely seen as one of the key reasons for the relatively slow rate of adoption among European retail investors.
“Low-cost products like exchange traded funds are hardly ever recommended and this impacts the net returns that consumers can expect,” said McGuinness, at a meeting last week of the European parliament’s economic and monetary affairs committee.
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