More than three quarters of Australia's online retail investors could have difficulty accessing the ASX's mFund service because their existing broker does not offer access.
According to figures from Investment Trends, collectively CommSec, E*Trade, Nabtrade and Westpac Online Investing account for 76% of the online broking market share, and none of them are offering access to mFund.
ANZ's E*Trade, which accounts for 15% of the market, is the only one that has said it intends to join, but is yet to do so. The other three have made no commitments.
With 44% market share, CommSec is by far Australia's largest online broker. A spokesperson for CommSec told Financial Standard it had not seen much demand for mFund from customers, but will continue to watch its progress. Nabtrade and Westpac meanwhile declined to comment.
By listing their funds on the ASX, fund managers hope to tap the as-yet inaccessible well of funds from un-advised self-managed superannuation funds (SMSFs). But according to Aberdeen Asset Management Australia's managing director Brett Jollie, this will challenge the primacy of the bank-owned wrap platform model, which has a near monopoly on the distribution of managed funds to the retail market.
"It's going to be a serious threat to the platforms, so they certainly do need to look at their value propositions, they need to look at how to integrate it to the wider business," he said.
However, he added that he thinks consumer pressure will eventually force the banks to sign up.
ASX senior manager, funds and investment products Marcus Christoe was upbeat about the prospects of having the banks sign up, saying no discussion with the banks ended with a definite 'no'. He added that since mFund's launch in May, talks with banks have increased, spurred by demand from dealer groups that use the banks' broking services.
The absence of the major brokers is reflected in the low volume of transactions. Christoe would not disclose the actual volume, but said there had been "a reasonable trickle of applications."
Jollie was more candid, saying that since listing five funds on mFund mid-August, Aberdeen had received two applications. However, he stressed that he was never expecting a deluge of investment at this early stage. "It's going to be a very long, slow process," he said, adding that retail investors need to be educated on the advantages of diversification.
Bell Direct chief executive Arnie Selvarajah told a similar story. Since launching in August, he said Bell Direct had seen 18 transactions go through, 15 of which were from direct investors and three through dealer groups.
While the majority of transactions have come from direct investors, Selvarajah said he was receiving a great deal of interest from dealer groups. Given that the appeal of mFund was that it would give fund managers access to the non-advised SMSF market, he said he was surprised by this.
"Dealer groups are already trading in managed funds, and I would have thought that they were happy with how their currently transacting through the platforms. So their desire to move away from that has been interesting and surprising." This adds weight to Jollie's comment that mFund is a genuine threat to the wrap platform model.
ASX has recently launched an advertising campaign for mFund and is planning an mFund road show for retail investors and their advisers in October.
Get stories like this delivered to your email - Sign up for the free newsletter
Read more about...
, Brett Jollie
, Aberdeen Asset Management Australia
, Arnie Selvarajah
, Bell Direct
, Marcus Christoe
, Westpac Online
, Financial Standard
, Investment Trends
, mFund mid-August