CommSec Pocket vaults have likely been affected by the downturn in the financial markets. Around a third of its total investor inflows ($403m) went into the ‘techie’ investment option, twice as much as its second most popular Australian Top 200 theme ($206m ) and the third most popular Sustainability Leaders ETF ($197 million).
The global tech-focused option is said to power the BetaShares Nasdaq 100 ETF, which tracks the performance of the top 100 companies listed on the U.S. Nasdaq stock exchange. The underlying Nasdaq 100 index, which is dominated by tech giants like Meta and Apple, is down 25% year-to-date but up 116% over the past five years.
An ABC spokesperson said the bank does not comment on “customer feedback” but does provide Pocket users with a monthly newsletter outlining the underlying performance of ETFs. It also provides investor education as part of the CommSec Learn portal on its trading platform.
In an audio recording posted on the bank’s website on Tuesday, CommSec chief executive Richard Burns said the addition of Pocket to CommBank’s main app would provide a “frictionless experience” for customers to manage their wealth alongside savings and deposits.
He said Pocket’s launch in 2019 was timely given the influx of young investors into financial markets for the first time during the pandemic – a trend dubbed the Robinhood phenomenon after the controversial US trading app.
“We launched at the right time,” Mr. Burns said. “There has been real interest in retail investors starting their journey and Pocket has helped many of them.”
Australia’s online investor community has doubled to around 1.5 million since 2020, according to researcher Investment Trends. The research firm also estimates that around 866 digital wealth management apps are now operating in the market, targeting consumers between the ages of 15 and 35.
The number of fintechs targeting this niche quadrupled from around 164 in 2019. Online investing and cryptocurrency trading apps are the dominant categories, accounting for more than a third of the market.
Mr Burns said many Pocket users were driven by a desire for an alternative to the low interest rates offered on savings accounts and a desire to save for a home deposit. But he also said the lack of professional and affordable financial advice was a factor pushing clients into micro-investing.
“We know that financial advice has become more inaccessible… [and] more expensive than previous generations,” he said.
Median fees for financial advice rose from $3,256 to $3,529 per year last year, representing an increase of 8%, or 40% over the three years to December 2021, according to researcher Adviser Ratings.
CBA was once one of Australia’s largest providers of financial advice under its Commonwealth Financial Planning banner and its subsidiaries including Financial Wisdom and Count Financial. But he started selling and shutting down those businesses after the Hayne royal commission in 2018.
Analysts have advised big banks to return to the financial advice market in the future, most likely providing services digitally rather than licensing or employing professional financial planners.
Globally, the microinvestment and digital advisory market is estimated at around $1.8 trillion, with major financial institutions such as Goldman Sachs, Barclays, HSBC and Bank of America experimenting with apps and platforms. forms intended for novice investors.
Investment administrator Cache said a number of major Australian banks were in talks with fintech partners to enter this market and catch up with the popular precursor to CBA. According to Cache, around 1.29 million Australians have accounts with local micro-investment fintechs such as Spaceship and Raiz Invest.
CommSec Pocket is now seen as a major contributor to inflows for trading partners BetaShares, State Street-owned SPDR and BlackRock-owned iShares, which manage the underlying ETFs across all seven investment themes, according to Finder analysis.
A BetaShares spokesperson said: “In our experience, CommSec Pocket has proven to be a hit with new investors looking to start or continue their investment journey. Australian investors from all walks of life use ETFs as building blocks for their investment portfolio.
Some market sources criticized the narrow investment menu for omitting other key vendors such as Vanguard and VanEck.
The ABC spokesperson said: “A wide range of potential ETFs were considered using investment criteria that matched the seven selected themes. We regularly review these ETFs and their peers, including customer feedback.“