The talk at the 6th Inside ETFs Europe conference is whether Google is about become a shock new market entrant and revolutionize the retail investment market.
The biggest players in the ETF market are at the conference, organised by ETF.com, which started on Monday and finishes today. IFA Magazine has a reporter at the event.
One of the main speakers at the conference is leading ETF advocate Professor Jeremy Siegel, who explained that disruptive technologies have historically been the driver of growth. Citing the Industrial revolution, the introduction of the phone and, computers he argued that positive disruption promotes step change economic growth. One of the drivers of the current poor GDP growth worldwide is the lack of an economic disruptive technology in play right now. He said it was not clear where that next disruption is coming from.
President and CEO of ETF.com Matt Hougan stated that EFTs were that very disruptive technology outlined by Professor Siegel. He argued that the inherent advantages of ETFs of cost efficiencies, instant tradability, close market tracking and scalability, makes them the ideal platform for Google to step in and dramatically shake-up the retail investment market.
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The entry of Google into the management of individual wealth, given their dominance over the personal data market, will strike fear into the hearts of the financial intermediation establishment. But is it a real possibility? What’s more, will it bring prosperity for everyone in the market place?
This intriguing possibility arises out of Goggles ability to interact with a vast proportion of the world’s population combined with the low transaction costs of ETF’s. Already online providers are building model ETF portfolios for clients at zero cost. The trading costs are exceptionally slim and participation in market movements is virtually instant. Google could deliver your personal investment portfolio in absolute real-time with 24 hour trading at a very small cost, no minimum investment requirement and at a risk spread to suit you.
Imagine being able to choose between buying a pair of trainers on Amazon this evening, or deciding to be sensible and transferring the cash into your ETF account with Google instead. That future is available now, if Google choose to grasp it. The landscape for advisers in this scenario would change enormously, with one major link in the adviser value chain, portfolio construction, eliminated. Is this a bad thing?
Not necessarily. A mass market move to engage clients in investing and saving directly into equities would create a new advice market where the focus is not on the right composition of your personal investment fund, but with help in planning the whole of your financial life and making the right ‘big’ decisions. This points to the value of the advisers time, rather than the size of the clients funds and this weirdly moves the advice market away from the idea of funds under management, to a focus on the clients willingness to consult with a trusted expert on how best to organise their wealth and the activities they pursue to create it.
A move by Google into mass marketing of ETFs would create an enormous demand for fee based advice. There are some areas where humans always beat the machine, and strategic planning is one of them.