But the major banks have largely lagged, with Commonwealth Bank the only one to venture into the market through the launch of CommSec Pocket in 2019. The app, which offers investors access to a portfolio of seven ASX-listed exchange traded funds for as little as $50, has attracted 280,000 customers (80 per cent of whom are under 40) and $360 million in funds under management since launch.
Now, the other majors are eager for a taste, says Cache, an “investing-as-a-service” player that provides back-end infrastructure to several local micro-investors.
“We are currently negotiating the launch of micro-investing products for several retail banks in Australia,” said Cache founder Caleb Gibbons, a former financial services lawyer at Minter Ellison.
“Banks are telling us that they see the transactions from their accounts to fund micro-investing platforms. That’s a market they can’t ignore.”
‘Paying close attention’
National Australia Bank did not respond when asked whether it was among the banks in discussion with Cache, but the bank’s head of self-directed wealth management, Adrian Hanley, confirmed it was keen on the market.
“We’re paying close attention to developments in the micro-investing space and how we support entry-level investors, especially around the growth of ETFs through our Nabtrade platform,” Mr Hanley said. He pointed to the launch of the Nabtrade Academy, a content and financial literacy portal aimed at the new generation of investors and traders.
Westpac declined to comment on the Cache report, but it does operate a low-balance investment product, BTInvest, with make-your-own or off-the-shelf portfolios available from just $1000.
However, metrics on the take-up of BTInvest have not been made public, and it is one of several businesses under the BT Financial Group banner for sale as part of the bank’s exit from the wealth management sector since the Hayne royal commission.
ANZ – which last month sold its share trading business to CMC Markets for $25 million and is the most advanced in its wealth market exit, with the sale of its financial advice and superannuation assets to IOOF from 2018 – also chose not to comment.
The exit of all four major banks, to varying extents, from the wealth management business has been seen as a hurdle for them to experiment with micro-investing and, especially, robo-advice – which involves actual portfolio recommendations and, in Australia, requires a licence to provide personal financial advice.
But the Cache report argues that banks in Britain followed a similar path after their retail distribution review reforms, which Cache said was analogous to the royal commission in its disruption of the market.
“This disruption saw several major UK banks exit the financial advice and wealth market after receiving large fines,” the report states. “However, these banks have re-entered in recent years targeting a broader customer base.”
Mr Gibbons said local banks would follow suit once they have extricated themselves from the troubled business of comprehensive financial advice and the extreme regulatory compliance regime it triggers.
“For a bank, micro-investing allows them to meet their customers’ need to grow wealth over time without the cost, risk and complexity involved in operating a financial advice or wealth management business,” he said.
A CBA spokesman said the bank considered Pocket’s rollout a “success” and was now considering adding more underlying investments beyond the seven ETFs of the original product.
Unlike the three other majors, CBA will remain a major investor in the wealth management market as a 45 per cent owner of Colonial First State after selling the controlling stake to KKR later this year.
The spokesman said the bank “continued to evaluate” whether robo-advice product functionality might be an appropriate add-on to CommSec trading business or Pocket app.