Following years of development, J.P. Morgan (NYSE: JPM) is set to launch a service to allow investors to become invested in ETFs. For a small annual fee of 0.35%, J.P. Morgan will design an investment portfolio for an investor, more than likely a first-time investor. The Company hopes to make this investment service available to a magnitude of people who currently do not have the ability to buy into a highly managed portfolio service.
This digital investing service will be managed by a low-cost robo-adviser, and the service will be rendered You Invest Portfolios. J.P. Morgan has been fine-tuning the service for approximately one year, a trial that included 27 branches in Brooklyn, New York. You Invest Portfolios is yet another ploy by the Company to lure banking customers to invest with J.P. Morgan.
The annual fee of 0.35%, or 35 basis points, is in line with the fee of competitors like Morgan Stanley. However, the enticement that J.P. Morgan is offering is that the bank will waive fees for the underlying investments. This waiving of fees can make a large impact for many investors and serves as an incentive to invest with J.P. Morgan rather than another investment bank.
“We think we’re offering really great value at 35 basis points given the integration with the Chase experience and our rebating of all of the underlying ETF expenses,” said Jed Laskowitz, the J.P. Morgan executive who runs You Invest.
J.P. Morgan hopes to broaden the arena of investing for Americans by allowing more people to become easily invested in the stock market. Currently about half of Americans own stock through mutual funds while only 31% of people below the age of 30 own shares of stock. The Company will be able to manage portfolios for customers with a minimum investment of only USD 2,500. A majority of banks with financial advisory services will require a substantially higher minimum investment. Laskowitz also noted that 90% of You Invest customers are first-time investors and that the intention of the Company is to lower the minimum investment to USD 1,000.
The robo-adviser tool is an extension of the You Invest platform which the bank launched ten months ago. The concept of the robo-adviser arose a decade ago and was developed by upstarts Wealthfront and Betterment, which used algorithms to determine the best investments for investors based on their risk profile. Vanguard and Blackrock soon followed with their own versions of the robo-adviser. Not too long after, large firms such as Morgan Stanley and Bank of America followed down the path.
The robo industry has grown from almost zero assets in 2012, to become a more than USD 1 Trillion industry by next year, according to consulting firm A.T. Kearney.