Small time NZ investors able to get a piece of big time US stocks through new Kiwi Wealth investment platform - Hatch

Kiwibank’s sister company, Kiwi Wealth, has launched a digital platform that gives do-it-yourself retail investors direct access to share markets in the US.

Investors can use the platform Hatch to invest in over 2700 companies listed on the Nasdaq and New York Stock Exchange, as well as over 450 exchange traded funds (ETFs).

Hatch’s point of difference is that it enables investors to buy portions of expensive shares like those of Berkshire Hathaway, which at the time of writing were priced at US$328,500.

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.’

Hatch sits on top of the brokerage, DriveWealth, and the foreign exchange platform, WorldFirst; both of which clip tickets on trades in addition to it.

Hatch’s brokerage fees are as follows:

  • US$8 to buy or sell shares. If more than 400 shares are traded, an additional US$0.02 fee per share is added.
  • US$3 to buy or sell a fraction of a share.

Hatch’s exchange fee is 0.8%.

So if the exchange rate was such that NZ$1 = US$0.666, an investor would receive US$0.658 for every dollar they invested.

Let’s say they wanted to invest NZ$1000 in Nike shares - this would see them pay an US$8 exchange fee, leaving them with US$658 to invest.

From there they’d pay an US$8 brokerage fee and end up with 7.7 Nike shares (at US$85/share).

The US$16 (or NZ$24) they’d pay in fees is equivalent to 2.4% of the NZ$1000 they forked out to begin with.

However the more someone invests, the lower their fees would be proportionately.

For example, someone investing NZ$20,000 in Nike shares would pay a US$160 exchange fee and US$8 brokerage fee, which (at NZ$252) is equivalent to 1.3% of NZ$20,000.  

If someone wanted to invest NZ$1000 to buy part of an Amazon share, priced at US$1975, they’d only pay a brokerage of US$3.

Factoring in the exchange fee, they’d end up paying US$11 (or NZ$17) in fees, which is equivalent to 1.7% of the NZ$1000 they set out to invest.

Hatch touts itself as a “low cost” platform, and compared to ASB Securities for example (which only offers US trades over the phone) it is.

ASB Securities charges a brokerage of 0.80% (or a minimum of US$50) per trade plus an agency fee of 0.4% (or a minimum of US$40) for orders up to US$50,000.

It also adds on an exchange fee.

However for DIY investors who aren’t set on picking stocks or having an extensive range of investment options, but still want to invest in the US market, there options available that may be cheaper.

They can for example invest in a few index-tracking or managed funds through the online investment platform, Invest Now, and pay annual fund fees, but zero brokerage or exchange fees.

The Vanguard International Shares Select Exclusions Index Fund (which is 63% weighted to US equities) only has a fund fee of 0.2%, while the Smartshares US 500 Fund has a fee of 0.34%.

Coming back to Hatch, it doesn’t require a minimum investment. However its fee structure is such that it’s more economic to make larger trades.

And unlike Smartshares investors, or those who invest through InvestNow, Hatch users can’t set up automatic payments to make regular investments.

Hatch takes care of investors’ US tax obligations for an annual fee of US$0.50 and leaves them to deal with their own New Zealand tax obligations.

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?

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7 Comments

Interesting article. Vanguard, Smartshares etc aren't necessarily cheaper because you keep paying the fees on an ongoing basis. Presumably Kiwi Wealth does not hedge in NZD? (which is noice for those looking to "move money" out of NZD for some added currency exposure)

That's a fair point thanks. I've tweaked my wording to reflect this. 

Good option too for those who don't buy into the rainbows & unicorns ESG mandates of most of the local fund managers.

Can now invest directly & cheaply in those profitable "sin" stocks that are shunned for Virtue Signalling reasons.

Would be better to transfer the money yourself through TransferWise at 0.4% then buy from DriveWealth directly (the company that does the transacations for Hatch) - 1.25c/share
http://help.drivewealth.com/customer/portal/articles/1519497-what-does-d...

Except you can't. DriveWealth isn't a retail broker.

TransferWise is pretty good isnt it! Not sure I want to invest in US or EU markets with QT commencing or about to commence. Also the dividends on shares in Europe are ~3% compared to NZ ~5%. Almost makes sense to go in the other direction Euros -> NZD -> NZX

The FX fees are 80 bps and not 0.80% per the overview from MoneyHub. This works out to be around 1.2% based on the current FX rates....

"FX fees - 80 bps on the interbank rate is high, although Hatch has confirmed as the volume of transactions increases, they will look to renegotiate with World First, the provider of the FX conversion. Hatch gives the following example:
Base exchange rate (Interbank rate): 1 NZD = 0.67 USD
Hatch rate: 1 NZD = 0.662 USD (0.67 - 0.008)
We calculate the FX margin at 1.2% on the transaction above (1-(0.662/0.67)=0.01194)"
Taken from https://www.moneyhub.co.nz/hatch-invest-review.html