IG Group to offer ETFs via platform

The trading group, which launched its own stockbroking platform last year, will construct a range of ready-made ETF portfolios using BlackRock's model portfolios. The range is expected to be available to private investors via its platform next year.

Managed portfolios have typically been the preserve of discretionary wealth managers operating via independent financial advisers (IFAs) and are aimed at investors with large amounts to invest. The number of managers offering ETF-only portfolios is currently limited and those wanting to buy them direct from low-cost platforms have little choice.

Platforms such as Cofunds and Old Mutual do not offer ETFs, although Cofunds has previously said that as demand has increased for ETFs it is thinking again about whether it needs to offer them. Stephen Wynne-Jones, head of marketing at Cofunds, said: "An increasing number of our clients are telling us they'd like to see not-so-mainstream investments on Cofunds, but the overall demand remains small. These types of investments are in the planning mix for future development, but we have no timescales to confirm as yet."

Ian Peacock, head of UK and Ireland at IG Group said: "Portfolios composed of passive instruments, such as ETFs, have the potential to disrupt the investment management industry, challenging the traditional high-fee approach to asset management."

IG's option will mean investors can buy managed portfolios directly and will put them in charge of managing the portfolio. Investment supermarkets and platforms are coming under increased pressure to offer more ETF options to investors as demand soars. ETFs have been viewed as less mainstream products.

Michael Gruener, co-head of sales for iShares Emea at BlackRock, said: "While the availability of ETFs and ETF-based portfolios through platforms is still limited in the UK compared with many other European countries, solutions such as the IG Model Portfolios are instrumental in raising awareness and understanding of ETFs within the market."

Wealth managers currently offering ETF portfolios include Charles Stanley Pan Asset, Twenty20 Investments, SCM Private and Nutmeg. Fees for ETF managed portfolios tend to be lower than ones focused on active funds. For example, online discretionary manager Nutmeg charges 1 per cent to run a portfolio of £1,000 compared with Rowan Dartington, which charges around 1.6 per cent on top of the funds' charges. However Rowan Dartington's portfolios include more expensive actively managed funds which can outperform, compared with the very low-cost ETFs in Nutmeg's offering. IG has not indicated what its charges would be.

Robin Johnson, head of portfolio management, Emea at Morningstar, said IG's move was a sign of things to come, noting the surge in demand for a direct-to-consumer industry in ETF portfolios and added that platforms would have to do more to keep up. "We've recently helped clients build ETF-only portfolios which will be offered direct to consumers," he said. "There's certainly growth in that area and a desire to build such propositions. I think all platforms will have to offer a wider range of investment vehicles."

However, commentators suggested there was uncertainty over regulation facing platforms offering such portfolios, particularly around whether or not the offer counted as giving advice, which would mean more regulatory hurdles.

Christopher Aldous, managing director at Charles Stanley Pan Asset, said: "This does not address the issue of providing limited advice which would be needed to offer these portfolios direct to consumers.

"However, it is the direction quite a few firms are travelling in at the moment and a number, such as Charles Stanley, are grappling with whether it is a business area with true potential and trying to understand the regulatory challenges."

Mr Williams agrees. "Providing an asset allocation model and list of suggested investments is not considered advice at this stage, but it is on the border," he said.