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Digital investment 'no longer on the fringe'

Research suggesting that 1.5 million Kiwis are either using or planning to use digital investment platforms comes as no surprise to companies at the forefront of the sector.

Friday, June 18th 2021, 6:24AM 6 Comments

by Matthew Martin

On Wednesday, new research from the Financial Services Council (FSC) revealed the surprising number of Kiwis using platforms like Sharesies, Hatch and Smartshares to invest their money.

“Over the past eighteen months we’ve seen the incredible rise of the digital investor, and our research has revealed that 38.2% of adult New Zealanders currently use, or plan to use micro-investing platforms," says FSC chief executive Richard Klipin.

"That's about 1.5 million Kiwis and reflects a transformational shift in how we are choosing to invest our money.

"That's no longer at the fringe."

The most prominent micro-investing platform in New Zealand, Sharesies, operates under an exemption from provisions in the Financial Markets Conduct Act that govern the main NZX share market, although its clients are investing in regulated markets including the NZX and ASX.

Sharesies head of investments Gus Watson says his company, which now has 395,000 customers after four years of operation, is offering easy access to investing in shares to a generation of people who have been locked out of traditional assets such as buying houses.

Watson said the Covid lockdowns had given a lot of Sharesies customers time to explore options such as his company and that low interest rates caused by the pandemic were another "slow burn" for people looking for better returns than are available from term deposits.

The average Sharesies account is $4,000 and the average holding is three exchange-traded funds and four companies.

While its customer base had been attracting equal numbers of men and women before Covid, that's shifted to about 60% men now, Watson says.

Smartshares chief executive Hugh Stevens says what surprises him about the survey results were how many people had a negative view of robo advice – with only 34.3% of people agreeing that a robo advice platform was safe, even for those with limited financial knowledge and capabilities.

FSC content manager Clarissa Hirst says the survey found that men were more likely to use platforms such as Sharesies "for the fun factor," and women were more likely to use them to improve their financial capabilities and knowledge.

Hirst says security was the number one concern of those surveyed.

"It tops everything else. I think it's impossible to ignore."

However, men tended to be less concerned "or more willing to take the plunge".

She noted that Covid had less impact on people over 60 in terms of how they view investing.

"The older you are, the more financial storms you have weathered."

Klipin says while the advent of robo advice has worried investment advisers that it could displace them, "...there will always be a need for a personal touch-point, a human connection."

Tags: Covid-19 digital investment FSC Richard Klipin Sharesies Smartshares

« Covid-related KiwiSaver switches less likely with an adviserFive new funds for ethical investors »

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Comments from our readers

On 18 June 2021 at 8:00 am John Milner said:
With consolidation already of robo advice players in the US and an average account value of $4,000 in Sharesies, as an adviser I’m feeling rather comfortable with my value proposition going forward. I will certainly enjoy some of the efficiencies technology provides, but feel no immediate threat from these platforms, no matter how much they attempt to talk them up.
From my short exposure to the public use of these platforms, clients have seen strong returns from the markets and initially believe it easy to pick up some of this. Only to be disappointed with the outcome of no structured decision process in their selection of assets. Albeit the punt method.
On 18 June 2021 at 12:46 pm JPHale said:
I completely agree with you John, the reality of self-help risk is proof enough that people really don’t have an idea especially when it goes bad.

Humans are incredibly optimistic and they fail to plan for risk unless they have been trained or advised. Those taking these new approaches will largely only figure it out once they experience the downside and they won’t be told until they do.

not to mention the generation typically utilising this new staff has a disproportionately optimistic view of the world with lack of risk management
On 20 June 2021 at 3:11 pm dcwhyte said:
@J-P - Daniel Kahneman points us toward affirmation bias to confirm your view of the 'optimistic' investor.

@JM - overseas experience suggests that digital platforms of this nature may be a good source of selective referrals for Financial Advisers when the bull market hits.

And I wish people would stop calling these platforms 'Robo-advice' - the proper title is Robo-data or Robo-information, as there is no "structured decision-making process in their selection of assets" as John so eloquently points out.
On 20 June 2021 at 3:12 pm dcwhyte said:
@J-P - Daniel Kahneman points us toward affirmation bias to confirm your view of the 'optimistic' investor.

@JM - overseas experience suggests that digital platforms of this nature may be a good source of selective referrals for Financial Advisers when the bull market hits.

And I wish people would stop calling these platforms 'Robo-advice' - the proper title is Robo-data or Robo-information, as there is no "structured decision-making process in their selection of assets" as John so eloquently points out.
On 20 June 2021 at 3:13 pm dcwhyte said:
Apologies - reference to a source of selective referrals should read ...."when the bear market hits".
On 21 June 2021 at 2:37 pm JPHale said:
@DCWhyte ahuh ;)

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