Stuff Digital Edition

Share platforms change investing behaviour.

Daniel Smith

Ben Lewis wants to sell his house and put the proceeds into his investment portfolio on digital investment platform Hatch.

The 45-year-old Auckland investor already has a $100,000 return in his Hatch account and is selling a rental property to double down on his investments in the platform.

Online investment platform such as Hatch, Sharesies and Stake, allow investors to buy part-shares of companies on local and international stock exchanges.

Lewis started his Hatch account in late 2018 and has ridden a bull market rise largely buying shares in semiconductor companies AI and Tesla.

Although some experts are predicting a slowdown of capital markets this year, that is a prospect that does not spook Lewis.

‘‘A drop in markets wouldn’t change my behaviour at all. In fact, it would encourage me to put more money in,’’ he says.

Lewis gets most of his investment advice from social media. Although he knows most professionals would baulk at the idea, the method has worked for him so far, he says.

‘‘I know a lot of people in the industry would laugh to hear that you got your investment leads from social media, but there are a lot of smart people that I trust in the Hatch investor Facebook Group.’’

Last year Financial Markets Authority research found investor behaviour was changing largely due to easyaccess digital investments.

The research showed 31 per cent of all online DIY investors jumped into an investment in the last two years because they did not want to miss out.

And 27 per cent invested based on a recommendation from someone without doing their own research.

With a strong bull market largely rewarding these behaviours with positive returns, some experts are concerned people may be learning bad investing habits.

Simran Kaur, one half of the investment podcast Girls That Invest, says the bull market run has not taught people much in the way of differentiating between good and bad investments.

‘‘In the last two years . . . even if you bought any old company, it is likely it would have increased in value, especially in the US,’’ she says. ‘‘But that is not the normal case.’’

Kaur is concerned that the bull market may have given some investors false confidence in their abilities.

Chris Walsh, lead researcher at Money Hub, doesn’t blame the platforms for the bullish investing behaviour, but says slick user design and digital interface makes it much easier to invest quickly.

‘‘In the 90s we had the same kind of thing. My Dad would change his investments based on rumours his mates told him in the pub. That same behaviour is now helped along by the digital platforms, and they make money along the way,’’ he says.

But traditional share brokers make money in the same way, he says.

Grant Williamson, director at sharebroking firm Hamilton Hindin Greene, says that although the offering from digital investment platforms and a broker is similar, the broker takes better care of the client.

‘‘Well over 90 per cent of our clients do not just use us to facilitate share trading, but request advice on how to manage their portfolios,’’ he says.

He sees the platforms as a ‘‘discount broker’’ where shares are accessed at a lower cost, but investors miss out on the crucial input of financial advisers.

‘‘Financial advisers have the responsibility to make sure the investing decisions are made with the investor’s best interests. That is something lacking on these platforms,’’ he says.

Scott Alman, managing director of Consilium adviser group, likens receiving financial advice to having an architect design your house instead of building it yourself.

Although it is possible to build a decent house with your own two hands, if you don’t have the appropriate skills it can cause some serious trouble when a storm comes, he says.

Alman pointed to the number of younger investors locking in

‘‘How will you know what to do when your portfolio is down 10 or 20 per cent not for months, but for years?’’ Scott Alman Managing director, Consilium adviser group

losses to their KiwiSaver in the March 2020 market downturn as an example.

‘‘We have had a bull market run for such a long time that these investors won’t know how they will react when markets drop. How will you know what to do when your portfolio is down 10 or 20 per cent not for months, but for years? That is when we will see the value of advice,’’ he says.

Kristen Lunman, general manager of Hatch, says allowing people to invest how they choose is part of the democratising of financial access that the platforms have facilitated.

‘‘This is just democracy, people have control and choice. A side effect of having choice is

you need to develop the knowledge to make the best decisions for yourself.

‘‘We don’t want to go back to the way it was, an environment that only served the financial elite which locked most people out of investing.’’

The criticism that digital platforms offer access to markets without financial advice could soon become a non-issue.

Sharesies and Hatch say they are considering adding a financial advice component to their service.

But that will not make a difference to Ben Lewis, who says he will not take financial advice from a platform if it is offered.

‘‘I have been investing long enough to know how to get the results that I want. A financial adviser only knows as much as any other person.’’

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2022-01-16T08:00:00.0000000Z

2022-01-16T08:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/282780654869997

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