Sharesies Fee Changes

[Basil]

Interesting analysis here
https://moneykingnz.com/sharesies-january-2023-fee-changes-are-they-good-or-bad/
I see those investing tiny little amounts like a few dollars a week are venting a fair bit of steam about the changes with not a second thought for whether the platform (losing perhaps $30-40m a year if no changes were made) is actually sustainable.

Can't help myself observe that human nature is always a funny thing eh...people wanting service for below the real cost of providing it are always going to be disappointed in the long run either through the business itself failing or the price changing.

So why bother bringing this up here ?
Well there is something for people to think about.
Maybe you invest at about $50K a time then that's $100 brokerage per investment with Direct Broking @ 0.2%
If that went through Sharsies under their old fee structure of 0.5% for the first $3,000 and then 0.1% thereafter the brokerage would have been $62. 
Not really worth worrying about that difference I reckon but it's much bigger now

Under their new structure there's a price cap of $25 per trade so they are only one quarter the brokerage of Direct on a $50K order and one eighth of the Brokerage on a $100K order.  Their price caps on Australian and US investments are even more attractive.  Hmmm

I guess the question that must be considered, is what if Sharsies which is obviously facing serious financial pressure with its operational losses goes belly up and hundreds of thousands of individual share parcels need to be unwound by the receivers.  I guess if this is a real concern you can action a sizeable investment through Sharsies and then transfer it into your own name for $15.

Reading this under how does Sharsies make money  We earn interest from any money in your Wallet.  No interest whatsoever appears to be paid on the balance of funds you hold with them so that needs to be factored into the situation too.

$200 brokerage to trade $100K on Direct or $25 through Sharsies.  Hmmm...I think this is something now worth thinking about over the holidays.
Who can blame Sharesies for making changes to their pricing structure in an effort to stop hemorrhaging cash?

I bring this up because it appears to represent a new opportunity for more serious investors to save a lot on brokerage.   Will they execute decent sized trades for you in a professional manner?  I have no idea.    Does anyone else know?

[Plata]

In my experience, the sharesies order system leaves a lot to be desired vs competitors like jarden direct. Things I have found bothersome include slow order cancellation, slow order placement, orders in last 30 minutes of trading are often placed the next day, orders in last 15 minutes of trading ALWAYS placed the next day, no DRP, no market depth data. From memory jarden direct gives you live depth data for 3 months after a buy or sell order, whereas sharesies is going to charge 15 a month. I wouldn't want to make such large orders without live depth data, so feel the $200 to $25 comparison is not quite the truth. If you include paying for live data + transferring out (as I often do) I think the Sharesies offer alright but nothing to get excited about for most retail investors. I doubt there are many retail investors in NZ that trade in 100k blocks, and I wonder if they get special rates at the other brokers...

[Basil]

Appreciate the feedback, thanks.  Sounds like the service standards are a very long way south of what I'm used to.  For example, I sometimes place an order within 4-5 minutes of market close to take advantage of price anomalies thrown up under the last 15 minute price match system.  9 times out of 10 that order is placed in time to be executed as part of the final price match process.  Obviously, there's no chance of doing that through Sharsies.
I also think that notwithstanding their price changes at the rate they're burning through cash the chance of this becoming a gigantic mess, (that could take many months or even years), for receivers to clean up is very real.  They can't keep burning through $3m a month for long.  Even their revised fee structure looks unsustainable to me.  I expect pricing to be further revised in the near future or they will go under.
I suspect their business model may in fact be systemically flawed in that they've attracted hundreds of thousands of extremely low / (no?), value customers that are ostensibly impossible to service in a profitable way. I think this all ends in tears and a gigantic mess for everyone involved. 

Funnily enough just received this email this evening.

Dear XXXXX,

With 2022 coming to an end, we would like to thank you for choosing Jarden Direct.

In August we announced details of our joint venture with FNZ and Hatch. Over the past few months, we have been working closely with both businesses to plan how we will leverage our collective capability to provide you with more extensive products and services.

In the new year we will reach out to ask how you would like our platform and services to evolve. In the meantime, it's business as usual, please don't hesitate to get in touch with the team if you have any questions.

For our clients using Direct Broking, your migration to Jarden Direct will be ready in the new year. If you would like your account to be one of the first to try the platform out, please contact the team at info@jardendirect.co.nz

Have a wonderful Christmas and Happy New Year!

Kind regards,

The Jarden Direct Team

Emphasis added.  Be interesting to see how that unfolds in 2023.

[Ferg]

They have market depth. It costs $10 a month.

Their new $15 monthly plan includes market depth and no fees on $5k of trades per month plus no fees on $10k of auto investments.  Per Basil's link that plan works out the best value for money if you invest or trade $800+/month.  I will move to that plan.  I pay for market depth anyway so it is costing me an extra $5 a month with the bonus of zero trade fees on the first $5k + $10k, so for me it will be cheaper than what I pay now.

I use it for accumulations that I then transfer over in bulk to my CSN.  It's cheaper that way. It will still be cheaper with the new $15 transfer fee.  Transfers are usually 1-2 days.  It won't work for someone who is not buying (or selling) every month.

Limit orders are instant.  At market orders are probably the same but I don't use them.  I have never had any issues with timing of placement, except for orders in the the last 15 minutes of the day.  Sometimes they do not get placed until the following morning.  How I get around that is placing out of the money orders at least 30 minutes before the close.  These sometimes get executed in the closing 15 minutes if my price is reached.

Regarding slow cancellations, I find cancellations happen straight away if the market is open - often an order still appears open but a page refresh changes that.  But when the market is closed they won't be cancelled until it opens again.  It's a pain given the funds are locked up, but it's not a biggie now that I know to cancel orders 30 minutes before closing time.

My only complaint is the lack of DRP.  Again, I transfer out in time for any DRP in which I want to participate.

Despite the security they (supposedly) offer regarding client funds separation, which I do not doubt, I ultimately prefer to have the shares under my CSN, not theirs - hence the accumulate > transfer >accumulate > transfer approach.

In summary, it's not for everyone but so long as you know how they operate and work within those guidelines, it is actually very handy.

[Minimoke]

When Sharsies came out I quite like the idea. Seemed a good way of getting newbies interested in shares and investing. I am quite happy with my Direct Broking account so didn't see the need ot change.

The thing I didnt like was share being held in trust in sharsies name. I much refer my trades to be in my name. I know you can transfer the name over - but who can be bother with that extra level of admin.

I' havent seen sharsies accounts. But it would cause me concern if they went bust and some one had to unravel the shares held in trust to get them back to the legitimate owner. Sure as heck you wont be able to trade those shares quickly.

[Raven]

My experience with Sharesies is much more like Ferg's as opposed to Plata's.

[Plata]

They have market depth. It costs $10 a month.

Their new $15 monthly plan includes market depth and no fees on $5k of trades per month plus no fees on $10k of auto investments.  Per Basil's link that plan works out the best value for money if you invest or trade $800+/month.  I will move to that plan.  I pay for market depth anyway so it is costing me an extra $5 a month with the bonus of zero trade fees on the first $5k + $10k, so for me it will be cheaper than what I pay now.

I use it for accumulations that I then transfer over in bulk to my CSN.  It's cheaper that way. It will still be cheaper with the new $15 transfer fee.  Transfers are usually 1-2 days.  It won't work for someone who is not buying (or selling) every month.

I agree if you are making trades every month then it is likely the sharesies subs are the best option. I know you can buy the market depth, up until recently I was using jarden direct every few months to keep my live data that way. I have not yet spent the time to pick this apart and make comparisons, maybe after xmas I'll bother. I feel like the transfer fee may become quite influential on what broker is best. Fricken subscriptions, making life complicated. I think after this change pursuing an ETF heavy strategy on Sharesies might be less viable vs going direct with smartshares.

[Ferg]

I think after this change pursuing an ETF heavy strategy on Sharesies might be less viable vs going direct with smartshares.

Smartshares on Sharesies used to have no fees.  They now incur standard trading fees.  I'm guessing that will change under the new pricing model if one does the auto-invest option.

The reason I no longer do SS directly is 100% due to the delays in getting orders placed by Link MS or whoever administers the orders (I was doing automatic payments).  I often found that I (and I am guessing everyone else) bought on the same day at the highest price of the month when I did it directly with Smartshares.

The delays from my making a payment and the trades being executed was a number of days, sometimes up to 2 weeks or more from memory.  I think they bundle orders and then process in bulk on particular days (which allows them to front run on the underlying stocks?  I don't know but it wouldn't surprise me).  I played that game for maybe 4-6 months before I transferred my Smartshares over to Sharesies.

The pricing of some funds is definitely cyclical.  I now execute trades via Sharesies at prices I am happy to pay at what I think are low cyclical points, not the prices they decide.

What was really frustrating with trading directly with SS was placing an extra order today based on a good price, and then waiting days and days for that to execute.  Eventually the trade would be executed but at a price I would not have paid.  That was the deal breaker for me.  AFAIK you cannot have a limit price when dealing directly with Smartshares.  I might need to run some numbers to check my method is better.

[Raven]

Smartshares on Sharesies used to have no fees.  They now incur standard trading fees.  I'm guessing that will change under the new pricing model if one does the auto-invest option.

The reason I no longer do SS directly is 100% due to the delays in getting orders placed by Link MS or whoever administers the orders (I was doing automatic payments).  I often found that I (and I am guessing everyone else) bought on the same day at the highest price of the month when I did it directly with Smartshares.

The delays from my making a payment and the trades being executed was a number of days, sometimes up to 2 weeks or more from memory.  I think they bundle orders and then process in bulk on particular days (which allows them to front run on the underlying stocks?  I don't know but it wouldn't surprise me).  I played that game for maybe 4-6 months before I transferred my Smartshares over to Sharesies.

The pricing of some funds is definitely cyclical.  I now execute trades via Sharesies at prices I am happy to pay at what I think are low cyclical points, not the prices they decide.

What was really frustrating with trading directly with SS was placing an extra order today based on a good price, and then waiting days and days for that to execute.  Eventually the trade would be executed but at a price I would not have paid.  That was the deal breaker for me.  AFAIK you cannot have a limit price when dealing directly with Smartshares.  I might need to run some numbers to check my method is better.

Smartshares (direct) only action purchases once per month on the 20th, which are then allocated to you on the 30th. These new shares are created at NTA. Buying and selling on the NZX is frequently at very different pricing to NTA, some very substantial premiums/discounts for the smaller less liquid funds. I'm not sure how the two market-makers operate but they don't seem terribly active or efficient.

[Plata]

Yeah for sure the smartshares market prices are normally higher than their NTA from what I have seen. Seems like there are a few bots that know the live NTA at a given point in the day and conspire to give whomever is buying or selling a shit deal. For some of the etfs, I think it would be quite difficult to avoid getting screwed if you were investing more than a few grand... liquidity just isn't there.

[arekaywhy]

Yeah for sure the smartshares market prices are normally higher than their NTA from what I have seen. Seems like there are a few bots that know the live NTA at a given point in the day and conspire to give whomever is buying or selling a shit deal. For some of the etfs, I think it would be quite difficult to avoid getting screwed if you were investing more than a few grand... liquidity just isn't there.

This was what I used sharesies for, to beat them at their own game, by purchasing small amounts of say the top 5 holdings of whatever index.

Highly annoyed about the quadrupling of fees, but hey, what are we going to do in a small hsitty investor market.  Back to the house swapping game I guess...

[KW]

They have market depth. It costs $10 a month.

Their new $15 monthly plan includes market depth and no fees on $5k of trades per month plus no fees on $10k of auto investments.  Per Basil's link that plan works out the best value for money if you invest or trade $800+/month.  I will move to that plan.  I pay for market depth anyway so it is costing me an extra $5 a month with the bonus of zero trade fees on the first $5k + $10k, so for me it will be cheaper than what I pay now.

I use it for accumulations that I then transfer over in bulk to my CSN.  It's cheaper that way. It will still be cheaper with the new $15 transfer fee.  Transfers are usually 1-2 days.  It won't work for someone who is not buying (or selling) every month.

Limit orders are instant.  At market orders are probably the same but I don't use them.  I have never had any issues with timing of placement, except for orders in the the last 15 minutes of the day.  Sometimes they do not get placed until the following morning.  How I get around that is placing out of the money orders at least 30 minutes before the close.  These sometimes get executed in the closing 15 minutes if my price is reached.

Regarding slow cancellations, I find cancellations happen straight away if the market is open - often an order still appears open but a page refresh changes that.  But when the market is closed they won't be cancelled until it opens again.  It's a pain given the funds are locked up, but it's not a biggie now that I know to cancel orders 30 minutes before closing time.

My only complaint is the lack of DRP.  Again, I transfer out in time for any DRP in which I want to participate.

Despite the security they (supposedly) offer regarding client funds separation, which I do not doubt, I ultimately prefer to have the shares under my CSN, not theirs - hence the accumulate > transfer >accumulate > transfer approach.

In summary, it's not for everyone but so long as you know how they operate and work within those guidelines, it is actually very handy.

It is always good to understand the system and make it work for you, rather than the other way around 

My question is, what if someone wanted to put a $1M trade through?  That would be $3000 in brokerage elsewhere, does their $25 trade cap still apply?

The problem with these fractional share brokerages is that they are modelled on Robinhood in the US, who makes money from selling client order flow to HFT.  This is illegal for Australian shares, and HFT is not operating in NZ so this avenue of revenue is not available to them (other than selling orders for US shares to US HFT operators who might not be that interested due to tiny volumes).

[Basil]

Thanks to all those who have contributed.  I get it that some initial customers are annoyed although I think the basis for their annoyance is misplaced.
As a service provider myself I can tell you that the provision of services at below cost is simply not a sustainable business strategy and I think small, disaffected customers need to consider how fortunate they have been to get such ridiculously and unsustainably priced service for so long and be thankful to the founders and subsequent investors in Sharsies who have burned through a whopping $25 million dollars meeting their needs !  Pricing still looks extremely cheap and unsustainable to me going forward so enjoy that for as long as it lasts before it gets reviewed upwards quite significantly again in due course.
 
Had a bit of a think about this in terms of does it work for me.  My view as far as I am concerned time = money so for me to bother running a Sharesies account side by side with a direct broking (DB) one, (I have too much on call with DB to run a non-interest bearing wallet with Sharsies as my stand alone broker), to save decent money on the brokerage I'd need to be buying $100K at a time, fixed fee $25 with Sharsies and $200 with direct broking, saving $175.  But are you really saving $175 ?  No.

Here's the catch, every time I transfer $100K into the Sharsies wallet the clock starts ticking to execute the investment because $100K at (assuming 4.5% on call with DB from February 2023 when RBNZ put the cash rate up) generates $375 per month in interest with DB but nothing with Sharsies.  You have to execute the investment within 2 weeks to make it even marginally worthwhile which means there's more prospect of "forcing" the transaction through, being a price "maker", rather than a price taker and getting a better price.  The risk is you end up paying more and executing more quickly.  That and taking into account there's no interest on the Sharesies wallet this all brings me back to the highlighted blue part above.  Feels like a dog chasing its own tail situation to me.

It was well worth considering the whole thing though.  I also think the point I made in the post #2 above about the prospect of Sharsies entering receivership at some stage is a very pertinent concern.

Conclusion - For me, lets see what Jarden do with their Hatch thing next year.

[KW]

Here's the catch, every time I transfer $100K into the Sharsies wallet the clock starts ticking to execute the investment because $100K at (assuming 4.5% on call with DB from February 2023 when RBNZ put the cash rate up) generates $375 per month in interest with DB but nothing with Sharsies.  You have to execute the investment within 2 weeks to make it even marginally worthwhile which means there's more prospect of "forcing" the transaction through, being a price "maker", rather than a price taker and getting a better price.  The risk is you end up paying more and executing more quickly.  That and taking into account there's no interest on the Sharesies wallet this all brings me back to the highlighted blue part above.  Feels like a dog chasing its own tail situation to me.

Its funny how moving from a zero interest environment to one where you can easily get 4-5% interest on your money, changes EVERYTHING lol.  Methinks a lot of companies are going to find themselves in a whole different world now that people aren't prepared to hand over their dosh in return for nothing but a future promise of a return.

[Waltzing]

yep thanks MR B for the articles very interesting.