Fintech giant Revolut announced a partnership with Berlin-based Upvest to offer its app users the ability to trade 158 ETFs in just the latest sign that digital distribution is driving retail uptake of the wrapper in Europe.
Customers of Revolut Securities Europe UAB will be able to trade fractional shares of ETFs at volumes as low as €1, with the offering available to all users in the European Economic Area (EEA).
The ‘stocks’ segment of the fintech’s app will allow retail investors to perform either one, three, five or 10 free trades per month depending on their Revolut membership plan, with additional trades carrying a fee starting at 0.25%. The app also carries an annual custody fee of 0.12%.
The move marks the latest venture into ETFs for Revolut chairman and former Aberdeen Asset Management CEO Martin Gilbert.
Having told attendees of ETF Stream’s ETF Ecosystem Unwrapped 2021 event that not moving into ETFs was the biggest regret of his time at the helm of abrdn. Shortly after, venture investor AssetCo, which Gilbert chairs, bought a majority stake in thematic ETF issuer Rize ETF.
As a leading disruptor in banking, Revolut’s new ETF platform is a significant moment. Its app is offering trading – as opposed to wealth management or other investment opportunities – which may be a model of customer flexibility and fee gathering others may choose to follow.
Also, the fact it chose to begin its offering with ETFs, with plans for single stock trading set to follow, is both a vote of confidence for the wrapper and its recognition by cutting edge fintech players. It will also bring new retail awareness of ETFs in Europe, which currently lags far behind the US.
Revolut’s move is just the latest in the digital distribution story for ETFs so far this year. ETF savings plans have been front and centre, with the likes of Bux, Scalable Capital and Trade Republic all expanding the reach of their offerings while more established names such as Vanguard, M&G Wealth and Hargreaves Lansdown have all increased access to ETFs via new platforms and products.
The role of fintech in ETF distribution to retail is a story that deserves closer attention. JP Morgan’s challenger bank Chase UK has started incorporating Nutmeg – the robo-adviser it acquired in 2021 – into the ‘Save and Invest’ section of its app, offering customers access to the firm’s ETF-based model portfolios. Moves such as this and Revolut’s may only be the infancy of a long relationship.
Vested interests are hard to shift
In less optimistic news for prospective retail investors in ETFs, the European Commission’s ‘value for money’ rules look set to scale back its prior proposal of a blanket ban on inducements – or retrocession fees – for asset managers and banks.
Instead, the draft rules propose a ban covering only inducements on advice-free sales of products, meaning advisers can still earn a commission when selling certain products to their clients, even if the products with the inducement attached is not most appropriate for their clients’ needs.
Previously, European commissioner for financial services Mairead McGuiness said inducements were slowing the uptake of low-cost products such as ETFs.
Last month, McGuiness softened her stance and called for a ban on “execution-only transactions” during a speech in Stockholm.
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