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Comparing NZ Share-Trading Platforms



Full disclosure on this one; I use ASB Securities, Smartshares, Simplicity, Hatch and CMC Markets. The reason that I use all these different investing and trading platforms is that they are all superior at different things. ASB Securities is an easy and convenient way (for me) to trade shares, as I am an ASB Bank customer. They are my main share broking platform. Smartshares give me a cost-effective way to make monthly contributions to various ETFs, which I do at the moment to the Total World Fund and the US 500. I have 8 ETF (Exchange-traded-fund) holdings. Simplicity are the lowest fee fund manager in the country; and they are run by a charitable trust, which I like. I use them mostly for my Kiwisaver. Hatch provides me with an easy and cost-effective way to invest in US Securities. And they also have a good user interface, which is easy to navigate. And finally CMC Markets provides me with a platform to make speculative trades on anything from oil futures to the US 500. I don't have a lot in this account, since you can add 20:1 to 100:1 leverage in your trades.


Simply put, the platforms that I use can cover the full spectrum of the investing horizon; from a 30-year investment in the US 500 to a 5-minute trade in oil futures. But let's compare them to find out which one may suit you...


ASB Securities allows you to trade a large number of ETFs and Shares on the NZX and ASX, as well as their respective alternative exchanges. They are easy to operate if you are also an ASB Bank customer, but you don't need to be. For example, I used to have an ANZ Securities account, but banked with ASB. I left ANZ Securities when they closed down and moved their customers to Direct Broking (now Jarden Direct). ASB Securities is best if you are making longer-term investments on amounts above $4,000. The fees are 0.3% on trades above $10,000; and $30 for trades between $1,000 and $10,000. Recently they have started offering a $15 fee for trades below $1,000. But still, this is higher than the typical 1% that a full-service share broker like Craig's Investment Partners would charge you. So I would not advise someone to make a trade below $1,000 with ASB Securities. There are better platforms for this, such as Hatch and Sharesies. What ASB Securities do well though, is that you actually own the shares, unlike Hatch and Sharesies were the shares are held through a nominated account. This is very common for US Securities, but is not common for NZ and Aussie Securities, where you are assigned a Common Shareholder Number (NZX) or Holder Identification Number (ASX). The benefit of directly owning your shares is that you can vote on Shareholder motions, and elect to participate in a company's Dividend Reinvestment Plan (DRP). I have elected to participate in all the DRPs that I can, I think around 10-15. They are a good way to acquire more shares, and to further build capital (outside of share price appreciation).


I started investing through Smartshares in February last year, when I thought that I would like to start making monthly contributions to a couple of ETFs. You can buy ETFs through ASB Securities, but not in a cost-efficient manner. Smartshares enable you to put money in without charge. The ETFs are listed on the NZX, so can be bought and sold like any other share. The advantage of having ETFs is that they give you diversified exposure to the world's markets (Total World) or to a thematic theme. For example, I have a small investment in the Healthcare Innovation ETF. I don't think that ETFs should be traded, but should probably be more of a long-term hold. But of course, they are easy to sell, so if you need the money or think a trend is turning, you can get out.


Simplicity are the lowest-cost fund manager in NZ. They charge a 0.3% management fee + a $20 initiation fee. This compares favorably with the two cheapest ETFs offered by Smartshares i.e. the Total World Fund and the US 500 (you can probably tell that I like low fees). Simplicity is among the top performing Kiwisaver funds, along with Booster and Fisher Funds. But compare their 0.3% fee with Boosters 1.85% fee and the final returns you receive over time will likely be better. Simplicity is a passive fund manager, which means that they invest in broad-based stock and bond indexes. This strategy has outperformed an active (buying and selling) strategy over the past 100 years. So I'm fairly confident that a passive strategy will outperform an active strategy in the next 50 years. The founder and CEO of Simplicity is Sam Stubbs, who writes a weekly column in Stuff and is a very experienced Financial Services professional.


I opened a Hatch account in January this year, when I was looking to add diversification to my portfolio. At the time I had ETFs, NZ and Aussie shares and some REITS. But I was missing a direct investment in US Securities. So looking for the best way to invest in US Securities, I found Hatch. They offer extremely good exchange rate fees (0.5%), compared to the regular interbank fees (1.5%). Combined with very good brokerage fees ($3 for up 300 shares, and $0.01 a share after that). They operate as a third-party broker to Drive Wealth, which is a US-based broker dealer. It is important to mention at this point that your money is protected at up to $500,000, as per the US Securities and Exchange Commission. Like Sharesies and Stake you do not directly own the shares, you indirectly own them through a nominated account. This is very common in the US. By comparison, because they are similar, Stake has a 1% exchange rate for deposits and withdrawals; as well as a $19 per-month subscription charge for access to 'premium services'. Sharesies has a 0.4% charge for exchange rate fees, and a 0.5% charge for buy and sell orders up to $3,000 (and 0.1% after that). I think that Sharesies and Hatch both have a lot of positives, but not if you are wanting to participate in a company's DRP or have voting rights. Rather than using them as your only investment platform, it is probably better to use them as an add-on for diversification purposes.


Finally CMC Markets is a derivative, specifically Contracts-for-difference or CFD platform which can be used for making speculative trades. My advise is if you don't have at least 10 years experience trading the markets, don't even bother opening an account. Because you use 20:1 to 100:1 leverage on all trades, you can lose substantially more than your original deposited amount. They offer trading on CFD products, which are basically a contract you enter into with the Market Maker; and you do not own the underlying securities or commodities. You can trade most of the major listed securities around the world, as well as all types of commodities. This sort of trading is at the polar opposite end of the investment spectrum to (long-term) Kiwisaver.


As you can probably tell by now, all of these different platforms offer their own benefits. And this is the reason why I use a few of them. I do this to help spread my risk. Whether you do or not is up to you. But generally, different personalities will suit different points on the investment spectrum, and these platforms give you the opportunity to invest at different points on the spectrum.





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