Monzo clients rush to sign up for BlackRock offering

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More than 200,000 Monzo customers have joined a waiting list to use a BlackRock investment offering when it launches in the “coming weeks”.

Tens of thousands of customers signed up “within hours” of the initial announcement by the UK challenger bank on September 12, with the waiting list growing to 200,000 within two days.

The new service will offer the bank’s 8mn customers online access to three BlackRock multi-asset funds, which in turn invest in a range of passive funds.

Monzo’s investment service has not yet launched but is scheduled to do so “over the coming weeks”.

The queue of customers lining up to invest in BlackRock’s funds shows the potential opportunity for asset managers to work with banks in the growing online retail market, experts said.

Mike Barrett, consulting director at The Lang Cat, a financial services consultancy, said the numbers were significant because customer acquisition had been “the most challenging part” for so-called robo-advisers or non-banking online investment providers.

Monzo’s investment client waiting list is similar in size to the number of clients Nutmeg, the UK’s largest robo-adviser, has achieved after 10 years.

Other UK robo-advisers have got “nowhere near” 200,000 clients, Barrett said, although he added that Monzo was “never going to convert” its entire waiting list into investors.

Ali Masarwah, chief executive officer of Envestor, a German investment platform, said the BlackRock-Monzo partnership was part of the “gold rush” of asset managers and banks to attract young “digital natives”.

Exchange traded fund providers in particular see online services from banks and robo-advisers as a “promising sales channel”, he said.

In addition to their larger client base, banks also have other advantages over start-up robo-advisers.

For example, many robo-advisers “pulled in a lot of venture capital” when there was “cheap money” available, but “quite a lot” of these businesses were now “struggling”, because of “rising refinancing costs”, Masarwah said.

He added that ETF providers in Germany offered banks and robo-advisers marketing packages to attract their business, such as helping to finance the distributors’ ETF savings plans.

Monzo will offer its customers access to three of BlackRock’s MyMap range of funds of funds and will present these to its clients as Careful, Balanced and Adventurous investment choices.

At 14 basis points, the bank’s customers will be charged a lower fee for the funds than the products’ standard ongoing charge of 17bp. The bank will also charge its own 45bp platform fee, which is reduced to 35bp for its Plus and Premium customers.

Jeremy Fawcett, head of Platforum, an investment distribution research firm, said offering “ready-made” and “risk-rated” products using ETFs had become “the default way” of providing a simple investment solution for the “man and woman on the street”.

A bank is “the obvious distribution channel” for an asset manager to reach this “mass market” audience, he said.

Fawcett said Monzo’s younger, digital-only customer base was likely to invest “very little money” initially. The minimum investment is £1 (€1.16) for Monzo’s investment service.

However, if asset managers do not “align with [these clients’] behaviour” then firms will miss out on attracting their business as they get “more affluent over time”, he said.

Meanwhile, some Monzo customers have expressed unease at the bank teaming up with BlackRock, which has previously been criticised for its sustainability credentials by environmental campaigners.

One customer posted on Monzo’s community chat forum: “I’m a little shocked that you decided to partner with BlackRock. They have an awful reputation that’s completely at odds with Monzo’s ethos.”

But another customer took a different view, posting: “A lot of people in this thread seem to not actually understand who BlackRock are. They’re one of the world’s largest index fund providers […] so of course they’re […] the biggest investor in fossil fuels. Conspiracy town.”

Monzo said the three funds it offered “strongly consider the ESG impact”.

BlackRock’s MyMap 3 Select ESG, MyMap 5 Select ESG and MyMap 7 Select ESG funds each target a reduction in its carbon emissions intensity by 30 per cent relative to an equivalent non-ESG portfolio, Monzo said.

Each fund also targets an absolute reduction in its carbon emissions intensity over a five-year period on a rolling basis.

Additional reporting by Robert Van Egghen.

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at igniteseurope.com.