Investment Platforms Deliver Painful Returns To Some Young Kiwis

Media and marketing hype around investment platforms like Sharesies, Hatch and Stake—coupled with poor advice or no advice—means young Kiwis are losing thousands of dollars, an eventuality for which they may not have been adequately prepared.

At the coalface of providing independent financial coaching to families and individuals on how to manage their money and to get better affordability and outcomes, financial coach Shula Newland, said one young client lost a $20,000.00 house deposit even though that person had done some research and talked to financial advisors.

“This person is beating themselves up and may forever be scared off the share market, just like the entire generation that got burnt by the 1987 stock market crash. More than 30 years on, there are still Kiwis who do not trust the share market.

“We don’t want another generation scared off investing in the stock market ever again. It’s not the platforms that are the problems so much as the hype around them and the inadequate preparedness of new investors.”

Newland said that many young Kiwis who are shut off from the property market—and in light of low savings deposit rates—were looking at ways to grow their wealth and earn better returns on their savings. Investment platforms are hyped as a ‘sexy’ way to do that.

“Unfortunately, people do not understand the risk they are taking when their investment time frame is short.”

Newland said people speak to family, and friends and go on chat groups and listen to podcasts, but they need to realise these are only opinions based on that person’s own experience and research, and those expressing opinions are not necessarily educated or experienced to give advice.

“A podcaster, for example, does not take your personal financial situation, goals and risk appetite into account. I’m not saying investment platforms and podcasts are a bad thing—they get a lot of open discussion going and provide easy access to investing—but it is not a good idea to put your life savings into anything just because everyone else is doing it. Certainly not without expert advice unless you are prepared to take that risk.”

Cost and exclusivity, the perception that you need to be well heeled to consult an investment adviser, mean that ordinary Kiwis do not have access to good advice, particularly because they don’t know that there are less costly options available. Alternatives include independent financial coaches, who can give you an unbiased view and look at the big picture. Or free independent education on sites like Sorted which has a quiz to see what type of investor you are https://sorted.org.nz/tools/investor-kickstarter

“Wherever you turn you have the media, podcasters and experts, even the Government and others, advising Kiwis to talk to a financial advisor, but not all advisors are equal in terms of expertise and competence.

“It is important that you see the right type of financial advisor for the services you need (e.g., mortgage, insurance, investment), and realise that a lot of them are there to sell you a product, not necessarily give you advice on other aspects of financial planning. This is where independent planning and coaching advice can be worth its weight in gold.”

Newland said she recently heard a local educational platform encouraging readers to invest in a local investment platform, and she had to cringe.

“There was no comment at all about being able to invest over the longer term to ride out the ups and downs, or that it wasn’t suitable for short term investments depending on your risk appetite. Make sure you do your research and take good advice—don’t take risks with money you cannot afford to lose.”

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