Jenée Tibshraeny compares investment platforms Sharesies, InvestNow and Hatch, as they continue to break new ground making local and global markets more accessible

Jenée Tibshraeny compares investment platforms Sharesies, InvestNow and Hatch, as they continue to break new ground making local and global markets more accessible

By Jenée Tibshraeny

The proliferation of financial technology is giving do-it-yourself investors an increasing number of ways to manage their money.

Three investment platforms have entered the New Zealand market since 2017 - InvestNow, Sharesies and Hatch - through which people have invested a total of around $385 million.

An Australian platform, Stake, is also testing its product in New Zealand and plans to launch in coming months.

Retail investors have always been able to access local and global share markets. But they’ve had to use brokers to buy and sell shares in individual companies or units in exchanged-traded funds (ETFs). Those wanting to invest in managed funds have largely had to do so directly through fund managers.

These options have served investors with more money better than those with less. Brokerage fees make transacting smaller amounts relatively expensive. Fund managers also often require minimum investments in the tens, if not hundreds, of thousands of dollars.

This is where the likes of InvestNow, Sharesies and Hatch have seen gaps in the market.

They are essentially intermediaries that sit on top of traditional financial markets and products, providing investors with new ways to access them.

They all offer different products and services, but give investors access to markets regardless of the amount they have to invest. This makes it easier to achieve diversification.

The difficulty of course, when presented with so many options and no personalised advice, is working out what to invest in.

Investors will have to figure out their own risk profiles and how they’d like to structure their portfolios, before weighing up the best ways to manage their investments.  

The purpose of this piece - written by a journalist not a financial adviser - is to compare investment platforms (see commentary below table). 

  InvestNow Sharesies Hatch
Owned by Implemented Investment Solutions (IIS) - a Wellington-based specialist investment management company founded by Anthony Edmonds Trade Me (16%), Sharesies co-founders Sonya Williams, Brooke Roberts, Leighton Roberts, Martyn Smith, Richard Clark, Ben Crotty, and 26 other shareholders Kiwi Wealth - Kiwibank's sister company.
Launched in 2017 2017 2018
How platform makes money Fees paid by fund managers for listing funds Fees paid by users and fund managers for listing funds Fees paid by users
Funds under management $300 million $63 million $22 million
Number of users 13,000 50,000 >7000
Types of investments - ETFs 
- Managed funds 
- Term deposits
- ETFs
- Managed funds 
- Shares in individual NZX-listed companies coming soon
- ETFs
- Shares in US and foreign companies
Funds 110 funds managed by AMP Capital, Antipodes, ANZ, Devon, Elevation Capital, Fisher Funds, Harbour Asset Management, Hunter, India Avenue, Legg Mason, Milford, Mint, Morphic, Nikko, Pathfinder, Platinum, Russell Investments, Salt, Smartshares, Vanguard 26 funds managed by AMP Capital, Pathfinder, Smartshares. More NZX-listed ETFs coming soon  Over 500 funds managed by Vanguard, BlackRock, and more
Companies that shares can be bought in directly   NZX-listed companies coming soon Nasdaq and New York Stock Exchange-listed companies
Fractionalisation option   Yes for ETFs. Coming soon for companies Yes
Term deposits  ANZ, BNZ, SBS Bank    
Minimum investment Regular investments: $50
One-off investment: $250
Term deposit: $2000 (BNZ, SBS), $10,000 (ANZ)
No minimum No minimum
Management fees Different funds have different fees set by fund managers
Brokerage fees None None for current offering
NZX trading:
- 0.5% for orders up to $3000
- 0.1% for any amount over $3000
- US$8 to buy or sell 1 or more shares
- US$3 to buy or sell a fraction of a share
Other fees None Subscription fee: $30/year or $0-$3/month depending on size of portfolio Exchange fee on deposits/withdrawals: 50 basis points on the exchange rate
Auto invest option Yes  Yes Coming soon 

Fund supermarkets

InvestNow and Sharesies are like fund supermarkets that offer a range of funds through a one-stop shop.

So instead of someone having to go through all the “know your client” compliance with each fund manager they want to invest with, they can do this once through the platform and direct their money to how ever many funds they want.

Among InvestNow and Sharesies' offerings are the popular NZX-listed Smartshares ETFs, which track local and foreign markets, and managed PIE funds. These are similar to KiwiSaver funds and could be comprised of a mix of cash, bonds, equities and property.

InvestNow doesn’t charge its users. The only fees they will pay are those set by the funds in which they invest.

Meanwhile Sharesies charges annual or monthly subscription fees for its services (on top of fund fees).

Both platforms make their money by charging fund managers for hosting their funds.

InvestNow also offers ANZ, BNZ and SBS Bank term deposits. This means investors can shop for the best rates, without opening accounts at numerous banks.   

Passive investing at wholesale prices

InvestNow’s most popular offerings are its two wholesale Australian Unit Trust (AUTs) funds that track that world’s largest companies listed in major developed countries.

Investors would normally need a minimum of A$500,000 to invest in these Vanguard funds that have low fees of 0.20% and 0.26%, but can make one-off investments of $250 through InvestNow.

Hatch is a bit different.

It also gives investors the opportunity to pay low wholesale rates to invest in funds that track markets. However, being Vanguard ETFs (rather than AUTs) these funds are listed on the stock exchange.

For investors who are of the mind that the market always outperforms someone trying to pick stocks over the long-run, paying very low fees of around 0.03% to invest in a broad range of Vanguard ETFs is an attractive option.

The catch is that all of Hatch’s offerings are listings on the New York Stock Exchange and Nasdaq. This means investors will have to pay NZ$5 for every NZ$1000 they convert to US dollars before they start investing.

They will then need to pay a brokerage fee of up to US$8 to buy and sell units.

Investors keen on passive investing will need to do the maths to figure out whether they’d be better off paying no brokerage and exchange fees but higher management fees investing in Vanguard AUTs via InvestNow, or low management fees but brokerage and exchange fees investing in a broader range of Vanguard ETFs via Hatch.

The Hatch option could be more cost-effective for investors who make fewer and/or higher value trades.

Fractionalisation

Hatch also gives investors the ability to buy and sell shares in thousands of funds and companies listed on the Nasdaq and New York Stock Exchange.

A value-add is that it enables investors to buy fractions of shares/ETFs.

So instead of an investor going out and saying, ‘I want to buy X number of shares in Company X.’ they can say, ‘I want to invest X amount of dollars in Company X.’

This is useful if an investor would like to invest in a company like Berkshire Hathaway that had a share price of around US$322,000 at the time of writing.

It also means that investors don’t miss out on returns by having residual funds sitting in their Hatch accounts.

Sharesies is soon about to start offering fractionalisation by enabling investors to buy parts of shares/units of companies and funds listed on the NZX.

With the most expensive shares on the NZX only being NZ$45 at the time of writing (Mainfreight), fractionalisation won’t be as valuable in terms giving investors access to high-value companies.

However Sharesies is set to be a real disrupter by offering lower brokerage fees.

It plans to charge 0.5% for orders up to NZ$3000 and 0.1% for any amount over NZ$3000. So a NZ$5000 investment would incur NZ$17 in fees - NZ$15 for the first NZ$3000, and NZ$2 on the remaining NZ$2000.

The same investment made in NZX-listed stocks via ASB Securities (one of the most affordable online brokers) would incur fees of NZ$30. 

ASB Securities charges NZ$15 per trade under NZ$1000, NZ$30 for trades between NZ$1000 and NZ$10,000 and 0.3% for trades over NZ$10,000.

Other features worth noting are that Sharesies and InvestNow offer investors the option of making automatic payments, which is particularly handy for those with longer-term investment horizons who want to use their investments as savings vehicles. Auto-invest is coming soon to Hatch.

But wait, there’s more 

Stake, the new platform set to enter the market, will give investors access to US markets like Hatch does. It plans to compete on price.

Stake is expected to target more savvy, experienced investors, with 77% of its 40,000 Australian users having traded in shares before.

While Hatch’s interface is clean and user-friendly, the sheer number of funds and companies it offers lends itself towards investors who know what they’re after.

Sharesies’ fun user experience and much smaller offering better target new investors, however its subscription fee makes it costly for those with very small amounts to invest.

It has been granted a robo-advice exemption by the Financial Markets Authority, so may in the future provide users with personalised financial advice online. 

InvestNow’s website isn’t glossy, fitting with its low-cost offering.

Investors should be mindful of not taking platforms' ease of use as a cue to side-step doing their necessary due diligence.

While platforms’ user experiences might make investing look fun and appealing, it isn’t a game. The risks are real and those not-so-jazzy looking product disclosure statements still need to be read and understood.

Investors should ultimately remain focused on what they invest in, not how they go about investing. 

The rise of DIY investing does also not erode the value of financial advice. 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

51 Comments

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"ASB Securities, which is one of the most affordable online brokers, charges investors NZ$15 per trade under NZ$1000, NZ$30 for trades between NZ$1000 and NZ$10,000 and 0.3% for trades over NZ$10,000."

These commission rates are about 3x Interactive Brokers fees to trade established markets. Until this discrepancy is addressed our financial markets, particularly the equity and bond markets will continue to lag as an investment choice for retail investors.

If the government is serious about removing the concentration of investment in residential property addressing the issue of excessive fees is of paramount importance.

Glitzy, do you use Interactive Brokers? Were there any hurdles to that, do you need a US Bank account?

Yes I do but I set up the account when I was in HK and it is there I retain the a.c.

MTP, I have an Interactive Brokers account, which I set up from NZ about a year ago, so that I can trade US stocks and ETFs. You don't need a US bank account. There's used to be a 10K USD minimum to start an account, but they've recently relaxed this. Putting money into your IB account (or withdrawing it) is just a simple bank transfer, which costs nothing. To get set up, there are a few forms to fill out. There are a few more forms if you're setting the account up under a family trust, but it's not too bad.

"If the government is serious about removing the concentration of investment in residential property addressing the issue of excessive fees is of paramount importance."

That, and changing how share assets are taxed, i.e. taxing unrealized gains. Talk about a structural impediment!

Agreed. But I think that many people can't be bothered with the extra documentation to get setup.

Yes, they are a bloody rip off, I use tradestation for US shares, and the fees are far more reasonable, a flat $5 per trade on equities, up to 10,000 shares per trade.

Quick further comment ~ the AUM values of these platforms is absolutely miniscule. So small in fact one would question their viability.

Do you know how to make a small fortune from sharemarket investment? .... You start with a large fortune and before long it will be a lot smaller. THL Tourism Holdings Ltd down 5 percent in one day and 50 percent in one year. Here is some more, air nz, sky tv, synlait milk, fonterra fund. These used to be good solid companies. Do they even pay a dividend now?

..or NCM.AX. Up from $22 to $32 in the month I've held. Not one to brag....but don't bag shares.

That share hasn't been $22 in the last month.

typo sorry. "months". May 2019.

You always hear about the successes and never the failures. Is that one share your whole portfolio?

...no, but I have dropped a big bag in the last 6 months..too early in hindsight, but I do expect a major blow off. I was not intending to brag (this would be the first time I have ever mentioned such), but wanting to make the point there is a lot going on out there.

Good on you, selling out before the big bang and doing well. I dont subscribe to a big bang possibly a recession but will do my own thing and wont let it bother me.

.

Air NZ Dividend CPS 22.00 Dividend yield (Net) 8.26%
Sky TV Dividend CPS 15.00 Dividend yield (Net) 12.93%
Tourism Holdings Dividend CPS 26.70 Dividend yield (Net) 7.42%

There is a reason that they are high yield, unsustainable is a word that springs to mind. Sky Tv for example are in loss instead of profit.

No, they are not "in loss" as you put it. You clearly haven't read their annual report.

No I didnt read the sky tv annual report :) I leave that to the shareholders to watch their deteriorating position. I have checked the figures and apparently they recorded a loss last year of very nearly a quarter billion (241 million), is that not right?

We continue to expect Sky to hit our fiscal 2019 EBITDA forecast of NZD 234 million, in line with management's NZD 230 to 235 million guidance.
The balance sheet can certainly support the forecast 60% payout, given comfortable net debt/EBITDA of 0.8 especially as the no-moat-rated group is still forecast to generate around NZD 70 million in free cash flow a year.

I think you will find there was a $360 million impairment of goodwill in last years accounts.

Isnt that a quote from Morningstar on 16 may this year, referring to forecast earnings, in which case not from the annual report. If the operational earnings are so high (2018 100 mil approx) and the div yield so delicious then why is the stock value and with it the shareholders wealth plummeting still?

You should do some more reading. I have already explained the impairment of goodwill. There is good reason for the share price to be hammered, the board has been very slow to react to increased competition and new disruptive tech.

Sorry next time I will read all the small print and exclusions in advance. And sorry for your losses

You know what they say about assumptions. My share portfolio is doing very nicely, no need to be a one trick pony like some people.

All the companies you mention pay dividends, except Synlait who are still busy spending their money growing. They have gone from $2-3 a share in 2016 to around $9 today, pretty impressive.

Air still pay an 11.5% gross yield on current price, but there are risks around future tourist numbers (which has also impacted THL, who now pay a 9.6% gross yield but it wouldn't be surprising if dividends reduce in the near-term).

Sky are clearly old tech and in trouble, they need to reinvent themselves. Fonterra are a cooperative who listed as an afterthought. Both poor examples.

Of course this is only relevant for those of us who enjoy the game - regular investors should just buy index funds and soak up the general market increases without breaking a sweat. For them, the NZX50 is now at 10,544 compared to ~2,500 10 years ago, and the S&P500 is at 2,995 compared to ~1,000 10 years ago.

"Sky are clearly old tech and in trouble, they need to reinvent themselves. Fonterra are a cooperative who listed as an afterthought. Both poor examples."
Tell that to the longsuffering shareholders who have been duped. In my opinion index funds are for the really young and the super old. Those of us who like to manage our own investments enjoy hands on, I think that you agree. Another example and there are plenty might be flight centre Australia. You would need all the other companies in a portfolio to do exceptionally well just to break even if you hold any of the above. Shareholders spend all their time worrying how they are doing and whether the Dow or FTSE has crashed overnight. Whereas property investors can sleep easy.

I disagree - index funds are for anyone aware of the research stating they are almost always better than managing your own shares, and not so stubborn that they think they might be one of the lucky ones and/or that actually enjoys picking their own shares. Index fund holders do hold plenty of other companies to account for the occasional dog. It sounds like you've been burned before, perhaps even enough to develop an aversion to investing in productive businesses, so I'd recommend index funds to keep your emotions out of it.

Even in my portfolio, I hold 10-20 stocks so can soak up a few nasty surprises without going broke. I sleep easy too, thanks for your concern. I can tell you I did pick a dog and realised a ~50% loss, but other stocks more than made up for it. I track the unitised value of my portfolio and compare to indices so there's no hiding my performance.

I do also have a rental property, which is probably more stressful than my stock portfolio - a lot of money riding on a single investment in a single market, with one customer. If my tenant decides to leave, I have to find someone else. If something large breaks, I have to pay. With my share holdings, I pay the companies management team to deal with the day-to-day issues.

You obviously have a professional approach mfd. It must be profitable or you wouldn't invest the time required. Does your share investing take much time each week?

It's reasonably profitable - I wouldn't call it spectacular and still consider myself a newbie. I spend a little time each day scanning the announcements and keeping a vague eye on the market, generally in breaks at work. The portfolio tracking is automated through a google spreadsheet which tracks share values and spits out various stats each day.

Which has been more profitable for you, the shares or the investment property mfd albeit that the property gives you more stress? From memory your property is not in nz which could make a difference.

The shares, and by quite some margin. The rental was my old house, so not a deliberate rental purchase, and is in the UK. I've also had the same tenant for a few years now and have been pretty gentle with the rent raises as they're looking after the place quite well.

Thanks Jenée ..........just the article I've been looking for..will follow to see readers experiences.

With hatch and US stocks do you hold the share certificates or is that held in a US entity of some sort ?

Not sure if push came to shove. They are held by DriveWealth, with the Chinese bank ICBC is at the end of the chain, and they appear to be the ultimate certified holder of any securities bought.

Sources: https://www.moneyhub.co.nz/hatch-invest-review.html
https://help.hatchinvest.nz/en/articles/1804597-do-i-own-my-shares

Yes, DriveWealth doesn't hold your securities. The ICBC FS (Industrial and Commercial Bank of China Financial Services), which is one of the largest banks in the world and 70% owned by the Chinese government holds them. You own the shares, but your name does not appear on a share certificate. So Hatch or its parent company Kiwi Wealth do not hold your shares and you have to be okay relying on Hatch's international partners, but they seem solid (but stranger things have happened at sea). With the Australian property market in trouble and the big Australian banks in NZ, with currently no NZ deposit guarantee, or only a small one ($30-$50K) coming, is money any safer in NZ?

I can certainly recommend Hatch for US shares, which opens up the world a lot compared to the small NZ and Australia markets. They have a wide range of shares and ETFs to buy. It's really for companies over $US1 billion market cap, but there are some quite a bit lower than that if you know what you're looking for. Fairly good exchange rate commission, and any unallocated funds are put into a (low interest) Money Market Fund with Dreyfus BNY Mellon, with dividend paid out monthly. You can switch between viewing your portfolio in USD value or NZD.
Hatch takes care of the US tax and provides good reporting for easy download. Trading fees are reasonable and they don't charge custodial or management fees at all, unlike some other international share trading platforms. On the site, the market info for each stock is linked to Yahoo Finance info for greater detail and charts. All in all it's an easy, good experience. It would be good if they had an app (no doubt it's coming) rather than just the site, but it works well on mobile as well as desktop.

Article about Stake which has the same US broker DriveWealth by the looks as Hatch

https://investmentnews.co.nz/investment-news/aussie-online-share-trader-...

Sharesies has just provided us with an update...

It has revealed its brokerage fees for NZX trades. 

It has also been granted a robo-advice exemption by the FMA, so could in the future start offering personalised financial advice online. 

The table and story have been updated. 

Thanks, looks quite competitive. $5 on a $5k purchase compared to ~$30 from the incumbents. I got the impression they will only offer market price (or even end of day market price?) rather than being able to place a specific bid, but I could be wrong. If so that's a small downside, but probably minor compared to the lower commission.

I am amused by some of the commenters above, particularly Houseworks comments. HW displays an ignorance about investing in the share market as well as the risks involved. I've a third of a century of prudent and relatively low risk investment in the share market. Despite going to 90% cash a dozen years ago, my net worth exceeds the sum of my 35 years of gross employment earnings. About 10% of this wealth creation was due to property, the remainder was due to share market earnings as well as an aggressive savings paradigm for the majority of my wage earning career. I'd rate the earnings potential of the share market considerably higher than the property market, with less overall risk and higher diversification available.

For some, property investment is what they are comfortable doing. For others, they may use other avenues for wealth creation. Pointing out individual shares that are not generating huge capital gains is a bit silly. That would be similar to my pointing out the property investor that bought a beach-front property in Haumoana not too long ago, only to find that his property became beach property...

I do like some of the companies that Houseworks has listed, and I may even initiate a position in one due to the current bargain price level. Just as in housing, one gets the best result when buying after a downturn instead of when buying at the end of a large run-up in price.

If you call me ignorant you are not very aware of many peoples perceptions of the sharemarket. To give shares a better image you would know Mark Weldon even made an uneven playing field by switching the index to recount dividends. Shares are inherently risky and bricks and mortar are about the safest investment available which is why banks lend on houses. You will never convince me to waste my time chasing (pathetic) sharemarket gains. Just as I will not convince you to go big in property.

Your first sentence covers the basics quite well. Just be aware that perception is not reality. Had to google Mark Weldon... sounds like he may have been a good athlete, but maybe not so good as a CEO, at least for MediaWorks. It looks like he did rather well to grow NZX. The article I read about his departure from NZX mentioned something about a 535% return in the 8 years he was chief executive. Now, that is my kinda pathetic!

As to index tracking, to me it does make sense to incorporate dividend yield in the index. What matters is that you know what the index means in real terms so you can evaluate the data appropriately.

It has been pointed out to you several times about the incorrectness of your perception about sharemarket gains so I'll not bother addressing this error in your statement.

If property works for you, go for it and fill your boots. I'm rather happy with my lifetime results in the sharemarket myself. Hope you have a similarly excellent result in the property market.

Stop spreading misinformation yankkiwi the nzx50 gross index was around 2000 in 2002/03 and had only increased to 2500 by 2009 that is 500 points not percent. The index was modified to gross as a result of pathetic returns. The capital index is less than half the current value. Enjoy your night

You must really like the taste of your own feet..

Harmos said that during the period of Mark's leadership the organisation had grown from a 2002 position of revenues of $10.4 million, a loss of $500,000, no dividends and a valuation at $15 million, to its current position of operating profit approaching $30 million, dividends this year of $17.24 million and a market capitalisation of around $288 million.

By the eighth anniversary of its listing, NZX had generated a total return to shareholders of 535 per cent, or 24 per cent per annum.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=107...

I recommend that you take it up the the journalist that wrote this article:
https://www.nzherald.co.nz/hawkes-bay-today/business/news/article.cfm?c_...

"He said that by the eighth anniversary of its listing, NZX had generated a total return to shareholders of 535 per cent, or 24 per cent per annum. "

Hw,

I decided to look at data instead of articles that may be pushing forward inaccurate data. I looked here: https://nz.finance.yahoo.com/chart/NZX.NZ/ and came up with a total return that was lower than the 535%, but instead 355%. There may have been a dyslexia error involved... Claiming that the return was only 25% is laughable in its obvious fallacy. I'm trying hard to not use the "p" word.

In terms of total return, one needs to look at all aspects. This includes dividends, rental returns, insurance, rates, maintenance, costs for eviction and repair, etc. I'm quite happy to have an index that captures total returns. The people that bleat on about how the house price has gained 3%, but neglects the 2.5% cost for insurance, rates, and maintenance are quite confused about total returns. The total return of income plus capital gains minus costs is what really matters. For an 8 year period, I'm thinking that 355% total realized gain is rather good, maybe even exceptional. You may call that pathetic. You may also find that others may apply that same adjective to you instead.

Add:
Just for the sake of curiousity, I went to the rbnz website and looked at the HPI for the same period in question (6/2003 to 6/2011). The HPI had increased by a gigantic 66.7% during the same time that those 535% (or 355% as the case may be) gains were generated. One is rather pathetic. Can you tell me which one that would be? BTW, this time span includes the largest world-wide recession in many decades, which definitely negatively affected the share market returns so those may be a bit suppressed in this comparison.

Boom roasted HW. Smells like bacon.

Thanks Jenee for the informative article and thanks to the interest.co common taters for the educative discussion.

I remember paying over $70 NZD brokerage to what's now direct broking for AMD shares a few years ago. There was a custodial fee too. It was a real disincentive to invest overseas. Nowadays, if you can somehow get a bank account in Europe then you can use services like transferwise to move money, and degiro to trade shares with zero custody fees and flat rate brokerage of ~2.5 euros.

Thanks for the write up Jenae. Great to see all these new initiatives that enable people to invest small amounts in Nz without the hassle and risk of offshore accounts.

Just wondering if dividend reinvestment is offered by sharesies and hatch?
What forms of performance reporting are offered by sharesies and hatch? I’d like to see annualised returns reported.

The $30 yearly sharesies fee is really equivalent to a custodial fee as charged by the traditional brokers. The going rate for custodial fees is .3% (and nil custodial fees on offshore holdings at asb securities). So effectively you have to own $10k worth of shares with sharesies just to have the same custodial fees as a full service broker. Brokerage is definitely cheaper with sharesies which is all good.

Btw just a question for the commenters here who have overseas broker accounts and use transferwise etc - why do you even pay any brokerage when there are overseas brokers offering commission free out there?? - just wondered... doesn’t appear to be very ‘savvy’ on their part.