The impact of the global financial crisis appears to have slowed a push by one of Australia’s biggest publishing houses, Fairfax, into the online managed funds space.
Fairfax is the publisher of a number of major newspaper titles, including The Sydney Morning Herald, The Age and The Australian Financial Review, which have been strongly critical of financial planning practices.
The publisher acquired InvestSmart, an online non-advisory managed funds broker, in 2007 and merged it with Direct Access, a personal investment distribution channel also owned by the publisher.
At the time the merged InvestSmart/Direct Access business had $1 billion in funds under management. But InvestSmart business development manager Michael Roberts said the group’s funds under management (FUM) had since fallen to around $700 million, dragged down by broader market movements. Net flows remain “neutral to slightly positive”, Roberts said.
The chief executive of Fairfax at the time, David Kirk, said the acquisition of InvestSmart was the “logical next step in creating a market-leading position in the high growth online financial services market”.
Despite a change of management since then, with Rural Press chief Brian McCarthy now at the helm, and the impact of the fall in share markets, Roberts confirmed that InvestSmart becoming the market leader in the online managed funds space was “definitely still the plan”.
The group currently accounts for around 30 per cent of the market, Roberts said. The dominant player is CommSec, which controls around 60 per cent of the market.
The group’s premise is that rather than purchasing managed funds from financial planners and then paying the associated fees and commissions, they can purchase managed funds from InvestSmart, which rebates all entry fees and places a cap on trail commissions. InvestSmart also offers investors fund comparisons and “extensive online research and analysis tools”.
The group has around 150,000 free subscribers to its site, of which Roberts said around 20 per cent were invested in managed funds, with an average portfolio size of around $50,000-$60,000.
InvestSmart sits under the Fairfax Digital umbrella, which also includes the online publications of The Sydney Morning Herald, The Age, Business Day and The Australian Financial Review.
Roberts said the group’s strategy for increasing market share was predominantly based on increasing traffic to the group’s website. He noted that since the Fairfax acquisition, the group had doubled its free subscribers.
“Now the strategy is to get them converted into invested clients.”
Roberts said much of the traffic was due to advertising cross promotion of the business on other Fairfax websites, including the online publications listed above, as well as Fairfax’s financial services transaction sites, Trading Room and Money Manager.
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