In our previous article, we gave the background to the increase in demand for fractional ETFs in model portfolios.
Many platforms, however, are still not offering these, despite some of the real advantages they offer.
As well as being able to offer increasingly lower costs, platforms that use fractional trading are not limited to buying or selling full shares of ETFs. This means they minimise the risk of holding excess cash or of creating dissimilar weightings between model portfolio clients.
Just to recap, fractional ETFs allow you to invest all of your client’s investment capital, even if it means they can only afford part of a unit; i.e. if they have £290 to invest and the ETF trades at £100 a unit, without fractional ETFs they would only be able to invest £200, £90 would remain in cash.
The lower costs associated with fractional share dealing on ETFs have also meant they have proved attractive in meeting lower-entry level requirements for pensions and robo-advice demand.
Some providers have cited lack of client interest as the reason for not developing their offering in this way. But isn’t that a bit of the old ‘chicken and egg’ scenario? If more advisers were aware of the availability of fractional ETFs and the potential benefits for their clients, surely they would be asking for them to be included in model portfolios?
In our view, if fractional trading solutions in model portfolios become more widely available to advisers, the use of ETFs would increase across the platforms generally and the UK would no longer be seen to be lagging quite so far behind the rest of the world in this area.
We see things differently – the benefits of the Hubwise solution.
At Hubwise, we realised from an early stage that there was huge potential to help advisers improve the investment experience for their clients. And so we became one of the first platforms to enable fractional units in ETFs to be added to a client’s investment portfolio or when a model was being allocated as part of an investment strategy.
By designing and developing our own software, we introduced a flexible solution that not only makes life easier for our adviser clients but also helps the investor. As mentioned, with more and more people searching for cost-effective ways to invest, especially in light of the new pension legislation, fractional ETFs offer a natural solution.
Our technology helps you to ensure your clients remain fully invested, increasing the potential opportunity for returns – at the same time giving you greater choice, lower costs and more accuracy.
We like to think it’s one of our best kept secrets … if you’d like to be part of it, get in touch here.