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New investment robots halve fund costs for Danes

A new study shows that the race to be the cheapest investment robot in the Danish retail investment market is a close one. June, Darwin and Nora will make it easier and cheaper to invest, but one product stands out as the most expensive.

/ritzau/AP/Shizuo Kambayashi
Photo: /ritzau/AP/Shizuo Kambayashi

In the last years, numerous financial institutions have launched a series of new investment platforms, and through robot advisory and passive investments funds they want to make it easier and cheaper for Danes to invest.

On behalf of FinansWatch, the comparison website Mybanker has looked into the fees charged, and finds that some of the new players offer fees that are half the level of active funds.

The cheapest fund, according to the survey, is Nordea's impending investment app Nora which charges customers as little as 0.59 percent in APR (annual percentage rate), whereas the most expensive product is Jyske Bank's most aggressive fund with an APR of 1.7 percent.

"The study shows that fees with many of the new players have reached a satisfactory level if we compare them with the active funds that don't offer better returns than passive funds," says Ulrik Marschall, head of communications at Mybanker.

Follow market trends

The survey covers June by Danske Bank, Munnypot by Jyskebank, Sparindex by Sparinvest and Darwin by Bankinvest – which is offered by a series of local and national banks (Nord Investment having Københavns Andelkasse as partner bank) -- and Nora by Nordea which will be launched after the summer holidays.

With the exception of Munnypot by Jyske Bank, the new investment robots are passively managed, and in general, they simply follow market trends. FinansWatch observes that some platforms offer advisory services, coverage of risk profile, rebalancing and an automatic monthly transaction feature.

As stated above, APR is in the range of 0.59 percent and 1.7 percent if you choose one of the new investment apps to manage your money. The exact fee depends on the underlying index or EFTs (exchange traded funds) and on the share of securities managed by the fund in question.

As can be seen in the Mybanker's survey, the fees levied by the various investment platforms are largely the same, except for Munnypot by Jyske Bank which stands out as the most expensive. However, there are different kinds of services attached to the platforms, so the fees must be seen in light of the value provided.

Jyske Bank promotes Munnypot on continuous advisory services through the platform or from a banking adviser. This is contrary to Bankinvest's robot which is an "execution only" product with no advisory services, but it is possible to add savings targets and automatic transactions.

It is worth mentioning that it is free of charge to deposit or withdraw money with June, Munnypot and Nord Investment, but there are minor transaction fees associated with the other platforms in today's market.

Another difference is that June is the most aggressive fund and the cheapest, and the most defensive fund is the most expensive; but for Sparindex and Darwin the case is the exact opposite.

In general terms, the survey illustrates that the fees associated with new passive investment platforms are lower than with the traditional active funds.

FinansWatch says comparisons can be made between the numbers for Danske Invest's mixed, actively-managed "Mix Offensiv" fund which is dominated by shares and costs 1.34 percent in APR plus 0.32 in indirect trading costs, and Danske Invest's "Mix Defensiv" fund which is dominated by bonds and costs 1.1 percent in APR plus 0.27 percent in indirect trading costs.

Easy to use

Ulrik Marschall at Mybanker points out that fees alone are not the decisive factor for the success of the platforms.

"Overall, the idea is to identify the lowest fee to make the most of the interests, especially if you have a long timeline. Whether you pay 1.5 percent, 1 percent or 0.5 percent in fees is vital. No-one can guarantee returns, but fees are a constant factor," he says.

"On the other hand, if the fees of the passive investment platforms are largely the same, I believe the winner may be the most intuitive platform. I believe that now a lot of people want to invest who previously thought it was a hassle", he says.

English Edit: Lisa Castey Hall Nielsen

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