Fintech at tipping point as regulators start taking sector seriously

Sharesies director Alison Gerry sees her role at as "helping them be successful."

New Zealand's burgeoning fintech sector is coming of age with the likes of the Reserve Bank thinking more deeply about the impact changing technology will have on the broader financial system.

The central bank identified the new wave of fintech as having "the potential to significantly change the structure of the financial sector" in its six-monthly financial stability report last week, singling out blockchain, crypto-currencies, application programming interfaces (APIs), big data and artificial intelligence, and digital platforms for peer-to-peer services among the most important.

Head of financial stability Bernard Hodgetts said in an interview last week that the central bank is thinking deeply about various scenarios arising from the new technology, and has identified open banking - which decentralises banking through third-party APIs - and crypto-currencies as areas where it can beef up its research.

"We've put quite a bit of thought into what sort of scenarios might lead to the core banking system suddenly facing more competition than it previously did," Hodgetts said. "The core level of profitability of the system could potentially be competed away if you had some form of new entrant into the market that could take business away from the banking sector and I think the banks would be very mindful of that risk."

The Reserve Bank's decision to highlight fintech in the report follows earlier efforts by the likes of the Ministry of Business, Innovation and Employment and the Financial Markets Authority to support innovation in financial services, and the bank wants to work with other authorities to make sure it doesn't stifle digital innovation.

Hodgetts said the existing banking sector has been at the forefront of adopting fintech, capturing and instigating innovations within their businesses. An example of that has been Kiwibank's sponsorship of the FinTech Accelerator run in tandem with Wellington's Creative HQ. That programme has just closed applications for its second iteration and attracted 65 teams. Of those, 13 percent were from ventures using blockchain technology with about half focused on crypto-currencies. One of the alumni from its first intake - Sharesies - has attracted veteran director Alison Gerry to chair its board.

Sharesies offers an online platform that lets people make regular, small investments in a range of funds, with a view to attracting potential investors in younger underserved demographics. The start-up is considering developing personalised automated financial advice, known as robo-advice, once FMA exemptions are in place.

Gerry, whose current boardroom roles include Infratil, Spark New Zealand and Vero Insurance, got to know the Sharesies team when she was a director at Kiwibank.

She said the platform offers "access to a suite of investment products embedded in a fantastic customer experience" targeting younger people as a means to help them access financial markets without having to go to a broker at a time when low interest rates limit returns from bank deposits.

Gerry sees her role at Sharesies as "helping them be successful" and "making sure that the governance frameworks at Sharesies are right-sized and fit for a fast moving, lean, growth company".

Sharesies launched in June and has more than 9,400 customers who have invested $6.8 million through the platform into a selection of managed and exchange-traded funds. It generates revenue through a distribution rebate on those funds.

The platform has already attracted the attention of NZX, which named Sharesies as a "channel innovator" in supporting the stock market operator's efforts to expand its ETF suite of products, according to a November investor day presentation.

(BusinessDesk)


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A whole article that talks about fintech and manages to studiously avoid mentioning the elephant in the room, bitcoin.

Nice propaganda piece but devoid of any serious discussion, or addressing the reality of the situation. Central banks have got a nightmare on their hands if people start defecting en masse to bitcoin and cryptocurrencies.

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Fintech suffers from a poor definition and therefore a lack of understanding. I can tell you that here in the US, it is not financial institutions that drive fintech innovation. It is outside market disruptors.

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Is this article native advertising for Sharsies?

The sharsies team are a bunch of ex product managers/marketers who have no investment experience. They have very limited products and lack transparency. How do we know that their recommendations don't steer you towards investment products where they get a higher commission/rebate?

Anyone who wants to invest in securities can easily go through their bank, ie ANZ/ASB Securities. Their average funds under management is $723.00.

"Let's build an investment platform targeting people who don't have much money to invest" - fail.

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Every article on Sharesies you're posting negative comments.

Who do you work for? A big fund manager or bank who continues to rip consumers off with exorbitant investment management fees? Are you losing business?

They now have 11 funds, many of the major index funds you'd want to invest in from Smartshares, which you should be able to realise can give you a pretty diversified portfolio. One that will beat most managed funds from banks and investment managers over the long term while paying 50-70% less in fees.

Why would I want to buy ETF's through ASB/ANZ at $30 a pop to buy and sell when I can do through Sharesies for a small $30 a year. Also, their UX/UI is amazing, something the big banks could look at doing themselves with their massive profits and budgets.

"Lets build an investment platform for only the super rich and charge them excessive fees" - every big bank. Change is coming. Doesn't look like you're ready for it.

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I'm posting FACTS.

Under FMA rules you have to have some level of experience to sell investment products to the public. The Sharsies team have no investment experience and are cutting through the red tape - it exists for a reason.

I would say that Sharsies are in fact the one's charging excessive fee's by nature of their target market / current demo-graph.

You're average investor has $723.00 invested @ $30 pa = 4.1% pa
ASB Securities charge $15 per trade <$1k and $30 >$1k, @ $723 = 2.07% pa.

How many times a year are people on average trading using the platform? What other fees are they charging/passing through to customers?

Your comment about management fees are wrong, for example -
ASB do not charge management fees on ETF's, they are charged by the fund manager which is the same for sharsies. You didn't mention any other fees which sharsies charge either.

Investors be aware under Sharsies T&C's:

We may set a maximum daily amount that can be withdrawn, as published on the Sharesies Website. We may change this at any time without prior notice.

Members of the Sharesies Group may also receive remuneration from product and service providers for any administrative or information services we provide them.

The personal information you provide or we obtain from third parties (such as a credit reference agency) may be used for the following purposes:
aggregating data for analysis and research and to provide management information or other services internally and to third parties.

(ie selling your information to third parities)

You will be responsible for paying any other taxes, costs and fees applying to the funds or other financial products that you invest in through the Service. Fund or other financial product providers’ management fees and expenses may be built into the value of the investments they offer.

(fees built into the value of investments vs being explicitly disclosed)

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Interesting your note about experience. Many fund managers who have a lot of experience fail to beat passive index funds year in year out. They aren't managing investments for anybody, simply providing a platform to access funds. This is probably how they got around it, and if you had read up about them you'll discover they've had many conversations with the FMA. Not operating without their knowledge.

You dont understand their business model, clearly you are stuck in the dark ages. Where can someone who has $723 investment it without hefty fees? They've only been operating 6 months. Theoretically that average balance could be $1500 in 6 months time and $3000 in 18 months time, which $30 would be 1% of an investors average balance. Many overseas platforms like Acorns, Wealthfront and Betterment charge a flat 0.30% fee, but with Sharesies once you investment enough your 'annual fee' will be below that of other services.

You're paying $30 a year to basically have unlimited trades. Many people are using Sharesies to invest $10-$20 a week. 52 trades a year with ASB @ $15 a pop is $780. This is not something you can do cost effectively anywhere else.

You don't understand my comment on management fees. Nowhere did I mention ETF's and management fees in the same paragraph. For example, ASB charges 1.25% per year plus a 0.45% buy in fee for their passively managed Growth fund. You could get all the underlying index funds from Smartshares for less than .60% a year. That is a rip off. Many other NZ actively managed funds charge north of 1% as well as performance fees. They struggle to beat their passive benchmark, and mainly hold the some holdings as the index anyway.

ASB also has similar clauses:
"You might not be able to sell your investment in some circumstances". "Your investment may be sold at any time but there is no established market for trading these financial products. This means you may not be able to find a buyer for your investment". Looks like we're even.

They are entirely upfront about the distribution rebate they get, as well as stating that management fees are built into the price daily. This is clearly disclosed in their application if you've even tried it. "There are management fees charged by the fund. These are management fees of x% per year, included in the share price".

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... I don't need to "read up" about them, there's not much to read anyway. I have the opinion they're a bunch of hipster marketers looking to create a new marketing database and they're preying on low hanging fruit, millennials. Can't it be that simple? They can sell your data to third parties - it's clearly stated in the T&C's.

This product seems like you're paying $30 for a gambling app, at the very least your paying to be part of some experiment. How long until you start receiving targeted ads in the app?

Remember - it's not only about what you get from a product/service, but also what you are giving away in the process. In this case it's not only your money.

Just invest directly with the ETF provider!
http://smartshares.co.nz/invest-now
Smartshares accepts direct investments from new investors from as little as $500 per fund and $50 per month ongoing.There is an establishment fee of $30.

I would argue that while yes - they are providing the platform, it would appear they are also providing advice "No experience, no worries. You don’t need to know anything about investing to use Sharesies, we’ll help you learn as you go." They're taking on a more broader role than just platform provider.

The reason I don't like this app is because I believe it sets a bad precedent - by giving unlimited trades you're not encouraging long term investment and savings. On-top of that given the targeted marketing/branding and average customer balance you're targeting the lower uneducated end of the market (at least by majority). I would say they're encouraging you to trade and thus generating contribution and withdrawal fees for the ETF fund which I am assuming is aligned with their rebate revenue structure at the very least.

If you have no share market experience or knowledge - read up before investing, until then save your dollars in a term investment and especially read up on "risk-adjusted returns". ie if you invest in an ETF there may be say 40% chance you'll get -5%, 40% chance you'll get +5% and 20% chance you'll get 0% over the year. If you invest in a term investment you have a 100% chance of getting 2.5% pa. Now which investments risk vs return ratio is more attractive to you? You've worked so hard to put away $20 a week don't gamble it away, you're better off saving and experiencing the "magic" that is compounding interest. Then when you've got a bit more capital to play with you can put in some research before you make trades which will hopefully net you greater returns in the long run.

https://www.investopedia.com/terms/r/riskadjustedreturn.asp
https://www.investopedia.com/terms/a/asymmetricinformation.asp

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