BlackRock’s exchange traded fund (ETF) division, iShares, is gearing up for the UK’s new distribution rules by hiring new hands.
iShares is to add at least six people to its UK-based operations in the months ahead as it prepares for the introduction of the Financial Services Authority’s retail distribution review (RDR) in January.
The RDR, which the FSA says is a key part of its consumer protection strategy, is expected to shake up retail distribution in the UK with the introduction of a ban on inducements.
In future, products that do not deliver commissions, including ETFs and investment trusts, will be put on a level playing field with funds. BlackRock hopes to take advantage of this.
Joe Linhares, head of iShares EMEA, says: “At BlackRock we are very excited about RDR. We believe it will enhance the move to more advisers offering fee-based services.”
Mr Linhares expects independent financial advisers (IFAs) to adopt the skills of asset allocators, using ETFs as building blocks for the portfolios of their clients.
The new hires will be in client-facing positions. They will include direct sales, people to design asset allocation models, and others to provide marketing material and content to IFAs.
Mr Linhares says: “The plans are currently in formation, but we’ll be adding at least half a dozen people. Over the next 36 months we will invest in more people as we see the opportunity developing.”
The BlackRock ETF division will also be rolling out different asset allocation models for advisers to use.
According to iShares, 2013 will be a year of transition for IFAs, who will have to adapt their business models to fee-based advice.
As part of their new RDR obligations, IFAs will need to have knowledge of the whole investment market.
iShares has developed online training to help advisers understand ETFs – and meet professional qualification requirements.
“In our view, RDR will create greater interest in passive investment vehicles and in ETFs,” David Gardner, head of sales for iShares EMEA, said in July when the training scheme was launched.
“We are committed to providing advisers with the information they need.”
The US firm also recently launched a website to provide information regarding the transition to an RDR-compliant business model.
Others within the ETF industry believe RDR will present an opportunity to grow assets.
In May, Vanguard launched its first UK ETF range, offering five low-cost funds. The US firm also recently recruited three sales staff to support IFAs.
Additionally, a recent Ignites Europe poll showed that 75 per cent of respondents believe retail investment in ETFs will rise following RDR.
It is not only ETF providers stepping up their efforts to address the UK retail market; active fund managers are as well.
Several firms have been busy launching clean-fee share classes to accommodate IFAs’ new obligations.
M&G, Aberdeen, BNY Mellon Asset Management and Old Mutual Wealth Management have all announced plans to provide RDR-friendly funds.
However, much uncertainty remains over RDR.
Almost two-thirds of IFAs (61 per cent) say they do not feel prepared for RDR, according to a BlackRock survey published last week.
BlackRock says 57 per cent of the 88 advisers questioned on the manager’s behalf are unsure of the business differences between independent and restricted advice.
Baptiste Aboulian is associate editor of Ignites Europe, a Financial Times service, where this article first appeared