Covid-19 has been a well-publicised game-changer for online investment platform Sharesies.
Investors in the platform swelled from 90,000 investors to 190,000 during the coronavirus crisis. At its peak, 2500 investors were joining a day and assets under management tripled to $560 million, says co-founder and acting CEO Leighton Roberts. Asked why so many invested in Sharesies during these Covid months, Roberts replies it was part of the universal movement to more things mobile, and the often-quoted idea that when the market is down, it's a good time to buy.
The mission of the online investment platform is to empower more New Zealanders to "dip their toes" into investing, no matter how small or large their disposable income.
Many in the finance sector agree that more retail investors would be good for New Zealand's capital markets. According to Sharesies' Roberts, retail investors in New Zealand make up 25 per cent of investors, compared with 35 per cent in Australia and 50 per cent in the US. So there is definitely a gap.
You would have to go back to the 1980s when New Zealanders last directly invested in shares in a great number. Kiwi families never quite bounced back from the 1987 sharemarket crash when they lost large amounts as the New Zealand market fell almost 60 per cent from its October peak by February 1988.
These days they can invest in NZX shares, NZX exchange-traded funds and managed funds, through Pathfinder Asset Management, AMP Capital, Smartshares and Pie Funds and others.
Roberts stresses that Sharesies — now three years old — is about wealth development not wealth management. This was the market gap the six co-founders, identified.
The other five co-founders are still with the company. They are Sonya Williams, who is chief of product and marketing and shares the acting CEO role with Roberts; CEO Brooke Roberts who is on parental leave, Richard Clark (chief technology officer), Martyn Smith (chief product engineer) and Ben Crotty (design chief). Experienced director Alison Gerry is board chair.
The bulk of Sharesies investors, 70 per cent of them, are new to investing — so education is stressed on the consumer-friendly, approachable site. There are blogs, a help centre and the site gives general referrals about where to get specific advice.
Sharesies' three key words are access, confidence and motivation, says Roberts.
"Access we have achieved. We hope that it's possible to invest in whatever they want, as the tech allows. And the confidence and motivation is Sonya Williams life's work," he says.
"There's no doubt that some people see us as a bit of a pain in the butt but with a potentially dying- off investor base, most people are pleased that we've arrived," adds Roberts.
Sharesies told the Herald in June, that it accounts for around 4 per cent of the trading volume on the NZX.
The company stresses that while there is a steady flow of consumers who are new to direct investing, as it becomes better known, it is also attracting more experienced investors who like the mobile platform, the low fees ($1.50 a month for a portfolio of $50 to $3000, or $30 a year for portfolio over $50 plus transaction fees of 0.5 per cent for orders up to $3000 buy or sell, and 0.1 per cent for amounts over $3000) and not having to come up with the usual large minimum sum required by broking houses when investing in a share portfolio.
Most managed funds also have too high a buy-in price for individual investors and that's why they come to Sharesies, says Roberts.
The Covid effect
As the number of Sharesies investors swelled during Covid, the age spread changed — it used to be that 80 per cent were under 40, now it's 72 per cent as the 40 to 55 age group has grown 21.6 per cent. The initial deposit and trade size also went up during Covid partly because people with more money were coming to Sharesies. As a result, the average trade in companies went from $175 in January 2020 to $500 today. There was also a 54 per cent increase in the size of the first deposit between February and March from $856 to $1321. This has now settled back to around the February figure.
Investors joining Sharesies do it "in bubbles", it's about conversations among friends, says Roberts.
For some coming to share investing for the first time, they are doing it because "there is no alternative when the banks give you nothing," he says referring to the low interest rates currently available for bank deposits.
Some in the finance sector caution is it now a wise time for inexperienced investors to try their luck with the share market.
The Financial Markets Authority, which regulates Sharesies, has said that new investors shouldn't rush in if they haven't done their homework and that chasing quick money can end in tears.
In response, Roberts says: "The message has remained the same for us. Before Covid-19 happened we always cautioned our investors to consider the risks first and aim to mitigate those with diversification, to only invest amounts they can afford; to consider the time in the market, and adjust their strategy based on new information."
This message has continued to be reinforced during the ups and downs of the last few months, he says.
New Zealand retail investors like supporting local companies
The online investment platform has seen more investment into direct shares in the past few months although clearly people are still investing in managed funds.
Roberts says it's around 50/50 at the moment whereas managed funds were dominant before.
The NZX companies attracting investor interest tend to be those getting more media attention — companies like Air New Zealand and Kathmandu.
Sharesies has offered its investors 33 capital raising opportunities since September 2019 which they have taken up with enthusiasm.
"I think New Zealanders are very patriotic, they've gotten more so and I think, in part, with all the local NZX company capital raising coming through, there's been huge support in the capital base. The average investment from Sharesies' investors in these capital raisings is about $100, we are getting thousands and thousands of these $100 investments," says Roberts.
What does the growth mean for Sharesies?
Says Roberts: It's made others think they should give it a go — for one thing.
"There is a bit of an appetite, we are creating a market here and I think others see that as an opportunity."
It's also meant that fund managers are now coming to Sharesies rather than the other way round, says the co-founder.
"People realise the power of our consumers."
Three years on and now with 190,000 investors, the dynamic is switching, says Roberts.
Other successful players in the online investment market include InvestNow and Kiwi Wealth's Hatch.
The Sharesies' co-founder maintains consumerism is the investing platform' main competition.
Asked if New Zealanders have to make more sacrifices to invest, Roberts replies — "It's not always about giving up something — that is not very motivating — as a founding team we are stereotypical millennials with some of our thinking — we want our avocado toast and our investments."
The online investment platform has flagged to its investors that they'll be able to invest in US shares soon.
They had earlier planned to expand investors' access to the Australian ASX, but the Covid crisis got in the way. US shares have been the most requested option on the platform, adds Roberts.
Investing in New Zealand startups could also be of interest.
Plenty of Sharesies participants would like a piece of the business because of its success, says Roberts pointing to a public flotation of Sharesies.
"We would look at floating.
"We'd love people to share in the upside, it's what we're all about."
The company's ownership at the moment is held by the founding team, the staff, Trade Me, and some high-net-worth angel investors.