ASX mFund could bring a substantial shift in the terms of engagement between investors, platform providers and fund managers, according to one of the new managed funds settlement service’s foundation members.
Having officially launched yesterday, after a years-long process that included significant regulatory hurdles, mFund is an electronic processing service allowing investors to buy and sell units in unlisted managed funds. The first transaction took place on Tuesday this week, between APN Funds Management and stockbroker Bell Direct.
“This looks like a real alternative [to platforms] for accessing managed funds, and a cost-effective way; not everyone needs wraps and all other sorts of products,” says JD De Lange, chief operating officer of Allan Gray, a fund manager.
He suggests this could shake up institutionally-aligned financial planners, who are restricted to selling clients the managed funds and other investment products listed on their licensee’s one or more allowed platforms.
“For independent financial advisers in particular, this is another value-add to their portfolio, which might not be that easy for the aligned guys.
“From an outsider’s perspective, I think the first thing it does is open up an alternative distribution channel. Where I think historically, there was a Chinese wall between stock brokers and financial advisers…over the last few years, [financial advisers] have moved into the direct equity space, but I don’t think fund managers have moved into the stockbroker space,” says De Lange.
Where are the platforms?
Large institutionally-owned platform providers are notably absent from the list of mFund’s more than 70 foundation members, which are drawn from a broad range of fund managers, responsible entities, unit registrars, administrators and brokers. This has been noted by a number of participants, including Connie Mckeage, chief executive of OneVue.
“I understand the dilemma [platform providers] have in trying to protect their existing revenue base but I learned a long time ago that change is inevitable so you may as well embrace it,” she said in February, when mFund crossed a major regulatory milestone prior to the launch.
“There are too many fund managers out there who want to regain control of their businesses and that deserve to have a direct relationship with their clients.
“Platforms take that away from them, whereas mFund creates an opportunity for fund managers to reconnect directly with segments of the retail market that until now have been largely intermediated.”
Aligned versus non-aligned
Asked whether he believes ASX mFund will pose a threat to bank-aligned financial advisers, De Lange says: “they’d have to have an answer why they’re not using it.”
“If it adds value, is more cost-effective and simpler, then surely you can’t just deny your clients access. You have to be able to replicate it or offer something similar.”
When a similar question is put to ASX’s senior manager of funds and investment products, Marcus Christoe, he says: “yes, there’s been a lot of engagement from the independent financial planners, but it’s fair to say that we’ve been having conversations with all the planner groups out there.”
As an example of its appeal to the institutional sector, he refers to its partnership with ANZ-owned online brokerage E*trade.
“You can see that E*trade is a foundation member of the service, and we continue to have positive engagement with the other bank channels, mainly through their online broking arms, but also on the product side, and they can see this again as growing their business outside of the traditional ways,” Christoe says.
The road ahead
Christoe says the next step will include adding further to its list of foundation fund managers and responsible entities.
“At present, we have 48 responsible entities and fund managers, 12 brokers and 11 external registries. We’ll see that number grow substantially over the next couple of months as we begin onboarding other funds. Some are more nimble than others in terms of getting the technology ready,” Christoe says.
Also coming next is “the distribution part of it, the sales and marketing, generating awareness about the service, it’s growing the number of people who connect into it both on the funds management side and the broker side, but we have the technology there, all the regulatory approvals are there.”
