Online trading platform IG Group has become the latest firm to launch a model portfolio to tackle the direct to consumer market through a partnership with BlackRock.
The IG Smart Portfolios will have five risk rated portfolios managed by BlackRock and using its iShares ETFs at “minimal costs”, the firm says. The platform will also allow clients access to fractional shares of ETFs.
Total cost of ownership for the range will be 0.90 per cent on the first £50,000 invested, 0.60 per cent between £50K and £250K and 0.35 per cent over £250K invested.
The average costs for the underlying ETFs will be at 0.25 per cent. These could vary from 0.22 per cent and 0.27 per cent, the firm says. There will be no set-up or dealing fees as well as rebalancing or exit fees for the product.
IG Group head of UK and Ireland Ian Peacock says: “Our research shows that many investors are confident handling their own investment choices, but even so, a number are still being blindsided by fees. Hidden charges materially eat into investment returns and it is crucial that providers are transparent about all fees upfront, so that investors know the exact costs they will incur.
“As we join the digital wealth management industry, we are keen to show that a low cost online service leads to greater consumer control and clarity, without compromising at all on quality.”
The model portfolios can be invested via the firm’s Isa and Sipp and the the IG General Investment Account. Minimum investment will be £500.
Source: IG Group
Platforum head of direct Jeremy Fawcett argues IG will find itself in “a crowded space” with the launch of the model portfolios, and that it is likely to see its technology being a better differentiator than the pricing.
He says: “IG’s launch is indicative of a wider trend towards ‘investment solutions’ for DIY investors – a hot opportunity at the moment.
“The ‘robo-advisers’ are already a feature of the landscape, either offering ‘discretionary direct’ like Nutmeg or automated advice like munnypot. Incumbents are in on the act; Hargreaves Lansdown has HL Portfolio+ based on active funds and AJ Bell Youinvest has just launched its own risk-rated passive funds.”
The trend also sees retail and private banks launching similar offerings, with the example of the recent Natwest Invest offering based on proprietary funds with Coutts investment management.
Fawcett says: “IG will find itself entering a crowded space. It has some nice tech and this is likely to be a stronger differentiator that its pricing. From iShares perspective, the more D2C services looking to go down the investment solution route, the better.”