CASE: Sharesies: NZ investment platform

Everyday investment company Sharesies was launched in February 2017, after conducting research on New Zealanders attitudes towards investing. Prior to launching the company, the co-founders interviewed over 200 people asking them If I gave you $50 right now, and you had to do something with it in the next 5 minutes what would you do? Only 5 out of 200 people chose an option to save or invest the $50. More popular options were bills, online shopping, coffees, vouchers, food, cigarettes, and beers. Yet all people interviewed said they want to invest.

Investing is different from saving. Investing essentially means giving your money to a company, or other entity, in the hope they provide you with more money in the future. Investing is riskier than saving money. Savings are sometimes guaranteed but investments are not. Investments can go up or down. But if you were to keep your money under the mattress and not invest you'd never have more money than what you've put away yourself.

The typical kiwi investing story is largely focused on getting on the property ladder. Saving enough for a deposit for your own home, and then investing in a second rental property once youve knocked off a bigger chunk of the mortgage. But, with property prices rising home ownership is becoming less attainable.

Most people would choose to spend their money rather than put that $50 towards house savingsbecause home ownership just feels too far away. But without an alternative way to invest their money, people are struggling to get ahead.

There are investment options available, but they are not accessible to people who do not know anything about investing. Only 25% of people spoken with said they knew where to go to start investing beyond owning a property.

They also feel like they need a lot of money to get started, need to know more, and there are just too many hoops to jump before they can get started. Traditional investment firms are focused on wealth management not wealth development. In other words, traditional investment firms focus on people who already have wealth.

Sharesies aims to make investing in shares easyby breaking down the current barriers that stand in the way of investing today. Sharesies wants to provide someone with $50 the same investment opportunities as someone with $50,000.

Market research

In 2018, Sharesies joined forces with Smartshares to conduct more research to understand New Zealanders attitudes towards investing. With the help of Colmar Brunton, they interviewed 1000 people from around the country to learn more about how Kiwis spend, save, and invest their money.

The results showed that overall, Kiwis feel good about the basics; the majority said that they feel confident managing their money (69%), in control of their spending (71%), and plan for the future (73%). However, not everyone feels they have enough money to live the life they want (35%).

Among the Kiwis interviewed, the most common form of savings was through a savings account at a bank (72%). The most common form of investments was Kiwisaver (65%) and owning your own home (59%).

When it comes to investing in shares, the survey results suggest that New Zealand is lagging behind other countries. 2 in 5 Australians and half of all Americans own shares, but only 1 in 5 Kiwis own sharesin fact, 4% of Kiwis do not have investments at all, and are not planning on getting any investments in the next 5 years.

When asked about investing, the key areas of concern that people had were around knowledge, cost, and risk.

Only 35% said that they understand how investing works. 62% agreed that investing in shares is riskyand half said that investing in shares is riskier than investing in property! While 39% of people agreed that investing in shares is a good way to grow your money, only 22% said that it is a good thing to do no matter how much money you have.

Looking specifically at non-investors, the main reasons for not investing in shares was not having the cash to spare (36%), not knowing how to invest (34%), and the belief that investing in shares is risky (31%).

Knowledge is power, and those who feel knowledgeable about the share market are more likely to own shares. Based on the survey results, this group consists primarily of males, Aucklanders, and those over 60. Sharesies aims to change this and they seem to be successful. 80% of the investors on Sharesies are under the age of 40 and are evenly split between men and women.

Product and Price

Sharesies is a Wellington-based investment platform.

There is no minimum Investmentsyou can invest from as little as 1 cent into any fund or NZX-listed company. Investors manage their portfolio via the Sharesies website and/or the app.

Sharesies has an auto-invest feature that lets you set-and-forget investments into a Global, Responsible, or DIY order. There is also an order suited to kids, only available via a Kids Account.

From the perspective of user experience, Sharesies goes beyond all expectations and delivers a friendly platform that is rich in design while making investments easy.

Sharesies customers can choose to pay their subscription monthly or annually. The first month is free.

Table 1. Monthly subscription pricing

Portfolio value	Price
$50 or less	Free
$50 to $3000	$1.50 a month
Over $3000	$3 a month

For customers looking to invest more than $3000 in one year, an annual subscription of $30 a year is recommended.

The monthly/annual fees make it less competitive than other platforms, meaning $18 per year on a $500 balance is a high price to pay. Understandably, as balances increase, the annual fee as a percentage of investment balance falls.

Customer base

At the end of 2019, Sharesies had 86k customers, and $157 million invested through the platform.

Sharesies co-founders have no desire for it to slow. "There's this perception that the minimum investing you need to get started is in the tens of thousands if not hundreds of thousands," Roberts says.

"The majority of financial institutions only really target the wealthy few, the democratising of investing hasn't happened in New Zealand and that's why we created Sharesies."

"What they have done is create an application for young people and old people to be able to invest just like it would be if you were checking out through an e-commerce store," Marshall says.

"It's a really consumer-friendly way to start investing."

Sharesies is best suited for: Anyone looking to start building up an investment portfolio who is comfortable paying a $30/year annual subscription fee. With no minimum investment, members have access to a wide range of funds. While competitors InvestNow and Smartshares offer a range of funds with no annual subscription fee, Sharesies is by far the most flexible in terms of investment opportunities.

Because of the low transaction fees and large number of funds available, Sharesies offers something for everyone. The original target market was under 40 and small-scale investors, the average investment balance is now well over $1,000. Furthermore, the app and website is a step above other platforms like InvestNow and SmartShares, letting customers keep close track of individual investment performance.

Educating consumers

The key reasons why people dont invest are: they dont know where to go or how to get started, they dont know what to invest in, and they think they need a bunch of money up front.

Sharesies is focused on educating consumers and simplifying investing. They do this in variety of ways. For instance, through the language they use and by having an approachable brand and an intuitive product. Because there is no minimum investment, people can start small and increase their investments as they build their confidence.

In addition to this, Sharesies educates their customers on basic investment principles through regular blog posts on their website. These blogs explain for instance what terms like dividends, volatility and diversification mean.

A certified B-Corp

Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.

Societys most challenging problems cannot be solved by government and non-profits alone. The B Corp community works toward reduced inequality, lower levels of poverty, a healthier environment, stronger communities, and the creation of more high quality jobs with dignity and purpose. By harnessing the power of business, B Corps use profits and growth as a means to a greater end: positive impact for their employees, communities, and the environment.

The certification puts businesses ahead that are truly good in all areas. Well known international companies like Patagonia, Ben & Jerrys and Allbirds are B Corps. As of April 2019, Sharesies is the first financial company to take the B Corp certification in New Zealand.

Future opportunities

Research by consumer website Boring Money found that women are less likely to invest than men, with only two in 10 (21%) aged 40 to 55 holding money in the stock market compared to over a third (34%) of men in the same age bracket. That said, Boring Money found similar numbers of men and women want investing to be simple 14% of men and 14% of women want a simple ready-made option from the organisation theyre using to help them invest, while 12% of men and 13% of women want a shortlist of investments to choose from.

The investment gap between men and women also narrows when it comes to the younger generation, with 45% of women under 25 having no savings or investments and 40% of men in this age group saying the same.

Sharesies believe that investing should be accessible to everyone and want to help more women feel empowered to make the most of their investing. They further note that investing is important because of several factors that have an impact on womens finances:

• Women often live longer.
• Women are typically not paid as much.
• And are more likely to take a career break (which adds to the gender wage and the retirement savings gap).

The first step in designing a customer-driven marketing strategy is selecting which customers to serve. The case described the original target market, namely those under 40 and small-scale investors, but suggests that Sharesies actual customer base is broader.

3a) Please describe two possible consumer segments that Sharesies might be targeting or could target.

3b) Now describe whether the two segments you described in 3a are accessible and differentiable. Please provide an explanation for your evaluation.