The Commonwealth Bank has been slammed by the ETF industry for its choice of ETFs for its new brokerage app.
The app, called the CommSec Pocket App, launched yesterday and is intended to compete with fintechs Raiz and SelfWealth.
The app, which targets millennials, allows investors to buy some ETFs while charging a mere $2 brokerage.
However the app only allows access to an exclusive clutch of ETFs, which have been hand-picked by the Commonwealth Bank.
The selected ETFs are intended to represent specific themes and investment strategies, like high dividend payers, technology companies and emerging markets.
However, and in a move that has been labelled “unhelpful”, ETFs were chosen based on their unit prices, industry sources say. And only those with the lowest unit prices were selected, even when better alternatives might have been available.
|CommSec Pocket Name||Ticker||Selected ETF|
|"Aussie Top 200"||IOZ||iShares Core S&P/ASX 200 ETF|
|"Aussie Dividends"||SYI||SPDR MSCI Australia Select High Dividend Yield Fund|
|"Global 100"||IOO||iShares Global 100 ETF|
|"Emerging Markets"||IEM||iShares MSCI Emerging Markets ETF|
|"Health Wise"||IXJ||iShares Global Healthcare ETF|
|"Sustainability Leaders"||ETHI||BetaShares Global Sustainability Leaders ETF|
|"Tech Savvy"||NDQ||BetaShares NASDAQ 100 ETF|
Taking low unit price as the investment criteria resulted in the wholesale snubbing of several ETF providers, most notably Vanguard, the most popular and cheapest ETF provider. Vanguard lists every ETF at a $50 unit price, making its products too expensive for CommSec’s purposes, it would appear.
Vanguard’s snubbing is particularly acute given that many of the company’s plain vanilla ETFs (like VAS and VGS) are considered the best on market by some researchers and analysts.
Brokers and platforms make decisions about which ETFs best fit their purposes all the time, and arbitrary and idiosyncratic decisions are not altogether unusual. However they usually base their decision on things like management fees, tradability, index methodology and fund performance. Choosing ETFs based on unit prices is very rare.
The decision to pick ETFs based on price appears to have been made in order to fulfil CommSec’s marketing promise of cheap ETF access. With this in view, industry sources raised a complaint: why were they asked by CommSec to complete requests for proposal when the selection criteria was a foregone conclusion?
Contacted for comment by ETF Stream, CommSec boss Richard Burns said: “We’ve selected ETFs that best fit the themes and which were appropriate for first-time investors. For each theme, CommSec selected the ETF from one of the leading participating issuers based on several factors related to quality and cost.”
He added that they received no payment from BlackRock, BetaShares or State Street for picking their ETFs and product selection was independent.