This article was originally published on Apr 03, 2017.
As you probably know, I use Smartshares for some of my investing. I’ve found it to be an easy and efficient way to invest in ETFs in New Zealand, and lately, I’ve been getting a whole heap of questions from you guys about them.
Instead of doing my usual ‘raving excitedly about a thing’, thing, I decided to hit up Dean. He’s the Product Manager at Smartshares and he’s been awesome enough to answer some of your questions for ya.
Check it out – it’s a little bit financial-jargon-y at times, so if there’s anything you’re not sure about just flick me a reply and let me know!
Do you see New Zealanders as a whole starting to understand the benefits of passive investing?
Smartshares have definitely seen an increase in media coverage on the benefits of passive investing, and this has translated into more calls and emails to our contract centre from mums and dads asking questions about our ETFs. Over the past two years, we have seen a significant uptake in the number of Smartshares investors, with applications up over 170% last year, we are continuing to see that increase further in 2017.
Do you have any resources you recommend to new investors?
S&P DJI, who develop the indices we track for our Australian and New Zealand equity funds, have several educational websites, which provides investors with a range of information on passive investing. These include:
- Index literacy – provides a 101 on indices and passive investing
- SPIVA – an annual review on global active management vs indices
- Investors can also find further information on Smartshares at: http://smartshares.co.nz/
- For further information on the global equity funds where Smartshares invest in a Vanguard fund, please visit: https://investor.vanguard.com/home/
How liquid are Smartshares funds? Are they easy to sell when I want to?
Smartshares has a dedicated market maker for the ETFs, which provides liquidity for our investors with active buy and sell quote in the market around the Net Asset Value. This means that although an ETF may not trade every day, investors can buy and sell at any time because the market maker always posts buy and sell prices.
What are the benefits of investing with Smartshares as opposed to investing on the ASX or the US stock exchange and how do you justify the premium between Vanguard’s fees and your own?
ETF fees are typically well below other managed fund options in New Zealand. Although these can appear higher when compared to other global investment options, we do encourage investors to consider the total cost of investing beyond just the headline management fee. This is particularly relevant when trading products offshore as investors may face additional charges, such as higher international brokerage rates, international custody charges, and higher margin on their foreign exchange conversion rates.
There are also plenty of other benefits of investing locally. For example, Smartshares dividends are paid in New Zealand dollars, investors have the ability to reinvest dividends (which is not always possible with offshore ETFs) and joining our regular savings plan where you can contribute as little as $50 a month towards an ETF with no transaction fees. It is also important to consider the benefits of a PIE regime, which caps the tax on distributions at 28%. This is compared to owning shares directly in an index, where the tax payable on dividends can be as high as 33% (depending on an individual’s circumstances). Investors should always consider tax advice for their own personal situation. Further information for Smartshares can be found in our tax document attached.
I’d love to know when Smartshares will build a Dashboard that investors can log into to quickly check the performance of their ETFs as well as easily amend the monthly contributions?
Smartshares investors can visit our share registry, Link Market Services where you can log in to see your unit balance, tax returns and dividends, as well as update your account details. Smartshares does not currently offer a portfolio dashboard tool. However, we are interested in your feedback and are actively exploring the addition of this function. If you would like to see current performance reporting you can load your holding details into a portfolio tool (for example sharesight.co.nz).
Any chance of creating a Smartshares app in the future?
We don’t have plans at this stage, however, people who do invest in Smartshares ETFs via SuperLife (e.g. for their KiwiSaver), can access their holdings via the SuperLife mobile app.
Could fees decrease in the future as you get more economies of scale?
(For those of you who don’t know what that is, it’s basically like Pak’nSave or Kmart where the bigger a company is, the cheaper things get for the customers)
Smartshares has previously signalled its intention to reduce management fees on its ETFs as growth in Funds Under Management (FUM) is achieved. Costs associated with running an ETF reduce proportionally as FUM grows. This was demonstrated last September when Smartshares announced a reduction in the management fee on the NZ Top 50 from 0.75% to 0.50% as FUM surpassed $200 million.
Do I have to employ an accountant and do a tax return if I become a Smartshares investor?
Each individual needs to work through their own tax requirement. All of Smartshares ETFs are structured as a PIE, and we recommend investors read our attached tax document to determine whether they need to seek further tax advice.
Smartshares has so many funds to choose from, how do you recommend new investors choose funds when starting out?
Smartshares does not provide financial advice, but we do recommend investors educate themselves on the products by reviewing some of the resources described above, and/or seeking financial advice from an authorised financial adviser. Our team is always available to answer product-specific questions. To contact the Smartshares team please email: email@example.com or call 08008087880
If you would like to find a financial adviser, we recommend visiting the Institute of Financial Advisers website at: http://ifa.org.nz/consumers/findadviser/search.php
You can download the product disclosure statement for the ETFs from the Smartshares website here. The product disclosure statements for our SuperLife products including the SuperLife KiwiSaver scheme is available from the SuperLife website here.
If you’re interested in learning more about passive investment providers in NZ, check out some of my articles below:
- My thoughts on the Sharesies Beta
- I chat with Anthony from InvestNow
- Breaking news: Simplicity releases new Investment funds
- I compare the fees of Smartshares and Simplicity
- Smartshares compared to Simplicity: Part two
Or, If you want to learn more about general investment strategy, check out one of the articles below: