The battle for digital distribution of financial services products in NZ stepped up a notch last week after Trade Me revealed it paid about $4 million for a 16 per cent stake in the start-up fund platform, Sharesies.
Sharesies, which has signed up about 20,000 members who have collectively invested $20 million in mainly NZX Smartshares exchange-traded funds (ETFs), would be worth about $25 million based on the Trade Me price compared to just $8 million estimate flagged at a venture capital meeting last year.
Outgoing Trade Me chief, Jon Macdonald, says in the group’s annual report that “we think that making investing more consumer-friendly can do great things for New Zealand while opening up big revenue pools”.
“This is also another step in us building out a vibrant New Zealand online ecosystem that ensures our growth in the long term,” he says in the report.
At the Financial Services Council conference last week, Sharesies co-founder, Brooke Roberts, said the firm was considering how to add more investors support tools including robo-advice.
Earlier this year rival fund platform InvestNow, which offers a wider product range than Sharesies, took over the legacy RaboDirect business adding more than $100 million to its existing $150 million pool of investments.
Macdonald is due to step down by the end of the year from the role he has held for over decade.
Trade Me has a 13 per cent stake in peer-to-peer lending service, Harmoney, while it bought 100 per cent of life insurance sales platform, LifeDirect in 2013.
LifeDirect, which enables consumers to compare and buy life insurance policies from a range of providers, contributed revenue of about $2.9 million to Trade Me over the six months to the end of 2017 – up 2 per cent year-on-year.
In the first half of 2017 Trade Me reported a year-on-year 11.3 per cent drop in revenue for LifeDirect as traffic waned.
Last month the Australian regulator took a swipe at the direct life insurance business there following a review.
The Australian Securities and Investments Commission (ASIC) analysis found direct life products had low retention rates and poor claims experiences compared to other channels.
In a statement at the end of August, ASIC chair, James Shipton, said: “Life insurance is a long-term product but cancellation rates and poor claim outcomes show that people are being sold [direct] products they don’t want, can’t afford, or don’t perform as they expected.”
The ASIC corporate plan, released last week, also earmarked technology as one of its “focus areas” over the next year, citing potential risks “driven by the growing digital environment and structural changes in financial services and markets”.
“We will continue to focus on monitoring threats of harm from emerging products (e.g. ICOs [initial coin offerings] and crypto currencies), cyber resilience, the adequate management of technological solutions by firms and markets, and misconduct that is facilitated by or through digital and/or cyber-based mechanisms,” the ASIC plan says.
The ASIC report also notes that the ongoing Royal Commission into financial services has accelerated change in the industry.
“Recent divestments of life insurance and wealth management businesses (as firms move away from vertically integrated business models) will result in a new competitive dynamic in these sectors,” the regulator says.