PAUL MCBETH: The wide world of investing

Paul McBeth is the editor of The Bottom Line and Curious News, and previously worked at BusinessDesk for 15 years. He has been a member of the NZ Shareholders’ Association (now Investors Association New Zealand) since February 2024. Curious News supplies the NZ Shareholders’ Association with a weekly column.

The New Zealand Shareholders’ Association has embarked on a mission to make its world a lot bigger.

After 25 years of fighting the good fight to lift corporate governance and encourage the big end of town to remember the little guy, the investor lobby is expanding its remit to cover the entire investment world, not just that of listed equities.

To be fair, the organisation has never shied away from taking on those it considers bad actors, be that founder Bruce Sheppard’s campaign against Hanover Finance or chief executive Oliver Mander’s more recent forays pushing for actual enforcement of eligible investor certification breaches.

Now it’s official, with a fresh name, logo and mission for the Investors Association New Zealand unveiled at the industry group’s two-day conference in Wellington last week.

Mander pointed out in his opening address that a growing proportion of the expanding funds that we as a nation invest is going into the likes of discretionary investment management services, managed funds and exchange-traded funds – about 21% of investments are DIY jobs compared to 38% in 2015.

So much stuff I will own

Times have changed, but someone who’s made their first KiwiSaver contribution has skin in the game just as much as a person who’s managed a share portfolio for 30 years.

And while there might’ve been about 150,000 Kiwi shareholders when the association was formed, consider that the Sharesies wealth platform has 1.1 million users, primarily in New Zealand, and that there are almost 3.49 million people in KiwiSaver who are investing almost $1 billion a month.

National Business Review reporter Nicholas Pointon captured the nub of this when he queried whether the association missed a trick in not doing this earlier, especially given the prominence of KiwiSaver in the upcoming election. Mander acknowledged that he would’ve liked to have rebranded and expanded the remit earlier, but that there wasn’t much point if the organisation couldn’t back it up.

Cast your mind back to when Sheppard handed over the chair’s keys to John Hawkins in 2010. The new leadership was interested in picking up the baton on the listed debt market and was happy to take a crack at the likes of Blue Star’s bond restructuring that clawed itself across the line in 2011.

And as Sheppard found out during his crusades against finance company ne’er-do-wells, those tens of thousands of Kiwis who lost billions didn’t translate into a corresponding rise in paid-up members when he was trying to take some of the more egregious behaviour to task in the late 2000s.

I’ve been stretching my mouth

Herein lies the tricky part. How do you advocate on behalf of people who have paid someone else to manage their investments, and many of whom don’t even consider themselves to be investors?

After all, it was dubbed KiwiSaver, not KiwiInvestor.

That’s a more difficult position to be in than that of advocating for listed shareholders, given equity owners have the right to vote on resolutions at their annual meetings, plus the ability to put forward their own ideas, or even cobble together enough support to call a special meeting. As Sheppard succinctly described it at the conference: they have a voice.

Sure, financial literacy has markedly improved in a long-running Massey University study, and the more problematic mortgage funds have cost hundreds of people tens of millions of dollars. But that’s a different scale from the widespread havoc caused in the 2000s by the finance company house of cards collapsing.

We’re also operating in a time of fragmentation. People don’t rely on the same gatekeepers – like this one – to stay informed, with trust in institutions flagging as our highly personalised online lives create an archipelago of individual realities that often struggle to coexist.

The big, big city

The Investors Association obviously hasn’t cracked that nut. It’s just at the start of its journey.

But Mander is clear that independent company assessments, engagement reports and advocacy for shareholders will remain central to its work. And fund managers can expect a similar approach, a welcome addition to the quarterly scorecards we see from the likes of Morningstar and Melville Jessup Weaver.

How many of us honestly pull apart our quarterly KiwiSaver updates to see how they match our chosen manager’s statement of investment policy and objectives?

Whether that will be a big enough lure to pierce the self-reinforcing bubbles so many of us operate in remains to be seen.

Expanding a remit is a difficult thing and can easily spread resources too thinly to keep delivering on the core objective. The association’s half a million dollars of annual individual and corporate subscriptions only go so far.

And sceptics are just as useful in testing ideas and execution as full-throated Pollyannas are in promoting them.

So much larger than life

One thing in favour of the optimists is the simple tailwind behind New Zealand’s wealth.

It might not feel like it to the squeezed middle, let alone those at the lower rungs often invisible to the rest of the nation, but New Zealand remains relatively wealthy on a per capita basis compared to the rest of the world, sitting fourth in this year’s annual UBS global wealth report with a median wealth per adult of US$206,617, one place below Australia and one above Denmark.

If you want to use the mean, we’re in eighth place with an average wealth of US$449,852, below Denmark and above Norway – it’s amazing how the 1% can skew things.

KiwiSaver is having a real effect, with those regular contributions compounding every year. Meanwhile, JBWere estimates between $1.1 trillion and $1.6 trillion of wealth will be passed down to later generations over the next two decades.

Little wonder big private equity players see real value in New Zealand’s wealth managers and financial services firms.

Of course, some of that will flow into New Zealand’s listed equities, and having a strong voice for the patient retail investors is a must given the lack of appetite from institutions and fund managers to look too far beyond the NZX’s top 20 companies.

Those money managers already come under the purview of regulators such as the Financial Markets Authority, but as the Investors Association proved in its previous incarnation, there’s definitely room for an organisation with small investors at its heart to take on a bigger role.

The challenge for the association is to do so without losing its own voice.

Image from Curious News.