Generation Rent Investment Guide episode 5: What’s the value investing in funds through online intermediaries Sharesies, InvestNow and RaboDirect?

Most fund managers will “stifle their laugh, only because they’re being polite” if you try to talk to them about investing your hard-earned $10,000.

If this frank admission from financial adviser, Martin Hawes, is still ringing loud and clear in your mind from my last Generation Rent Investment Guide instalment on managed funds, I come bearing some relief.

There are a bunch of New Zealand entrepreneurs who see value in democratising investing.

They see an emerging market of investors with smaller amounts of money who would like to receive the same benefits as those with larger wallets; tech savvy investors who are willing to do their homework to manage their own money, and who perhaps believe they can manage the risk of this through diversification.

I focus on three initiatives largely (but not exclusively) targeting this market in this episode of my Investment Guide series.


RaboDirect, InvestNow and Sharesies are all platforms through which you can invest in a range of managed and/or index-tracking funds.

These intermediaries enable you to invest smaller amounts of money than would be the case if you invested in the funds directly yourself.

While RaboDirect and Sharesies take a cut for facilitating your investment, InvestNow doesn’t. They all make a portion of their money from fees fund managers pay to have their funds on the platforms.

None of them offers financial advice.

RaboDirect – the first platform to hit the market in 2006 – is host to 45 managed funds provided by 10 fund managers.

InvestNow is similar. In fact its general manager, Mike Heath, set up RaboDirect’s platform as its general manager between 2005 and 2011.

InvestNow’s added appeal is that it gives retail investors access to two Vanguard funds that usually require a minimum investment of AU$500,000.  

Vanguard is one of the world’s largest investment companies that enables you to invest in index-tracking funds at a low cost. They’re included in a lot of KiwiSaver funds as they’re a cheap way of getting exposure to global equities.

InvestNow also offers seven Smartshares exchange traded funds (ETFs). These NZX-owned index-tracking funds give investors access to New Zealand and global equities. There are a number of ways you can invest in Smartshares ETFs, and you usually only need $500 to do so.

The new kid on the block – Sharesies – is in its beta phase, which means it is still tweaking its product.

It is quite different to the InvestNow and RaboDirect in that it only offers six Smartshares ETFs. The idea behind it is to provide a simple, user-friendly interface for first time investors keen to learn about the market by investing as little as $5.  

The start-up describes itself as a wealth development rather than a wealth management platform.

Here’s a run-down of what the different platforms look like and how they work:

  InvestNow RaboDirect Sharesies
Who A direct investment website owned by Implemented Investment Solutions (IIS) – a Wellington based specialist investment management company. Founded by IIS managing director, Anthony Edmond. An online division of Rabobank New Zealand, which specialises in savings and investments. Part of Rabobank Group. An online platform founded by Sonya Williams, Brooke Anderson and Leighton Roberts – all former Kiwibank employees.
Launched in March 2017 February 2006.  Beta launched in June 2017
Types of funds available Managed and index-tracking funds Managed funds Index-tracking funds
Fund managers AMP Capital, ANZ Investments, Devon, Fisher Funds, Harbour, Hunter, Mint, Morphic, Nikko, Russell, Salt, Smartshares ETFs, Vanguard AMP Capital, ANZ Investments, Devon, Elevation Capital, Fisher Funds, Harbour, Mint, Nikko, Pathfinder, Russell Smartshares ETFs
Number of funds 59 45 6
Funds under management > $80 mln > $125 mln > $1.5 mln
Available to  NZ resident retail investors
Minimum investment $250 $250 $5
What it costs to invest Nothing  0.75% of amount being invested. 0.5% if part of regular investment plan Flat fee of $30 a year
Management fees Set by fund managers (not the platforms). Different funds have different management fees.
Auto invest option Available from mid-September. Currently customers can only fund their InvestNow accounts, not their investments, with automatic payments.  Yes Not available yet. Currently customers can only fund their Sharesies accounts, not their investments, with automatic payments. 
Fund managers pay platforms for listing funds Yes. InvestNow’s parent, IIS, also receives fees from the nine Russell and Hunter funds that it is a manager of. Yes Yes

The question to ask when considering whether or not to invest through one of the platforms above, is what value does this add?


As outlined above, access to funds that small-time retail investors wouldn’t normally be able to go near, is a big one.

– Vanguard

InvestNow’s Vanguard funds look pretty attractive in this respect, as you only need $250 to invest in funds you’d usually need AU$500,000 for.

One of the strongest arguments in the passive versus managed fund debate is that you pay lower fees to invest in funds that track the market.

The trouble in New Zealand is that without a lot of scale and competition, Smartshares investors pay two or three times more in fees than Vanguard investors. So without mum and dad investors having direct access to truly cost-effective index-tracking funds, InvestNow’s Vanguard offering is really valuable.

The two International Shares funds don’t however provide you with a great selection. InvestNow says it is working on adding more Vanguard funds to its repertoire, so this is a space to watch.   

– Managed funds

Most of the managed funds listed on InvestNow and RaboDirect would normally require minimum investments of $2000 to $5000. ANZ Investments’ threshold is lower at $500, while Salt and Morphic’s are higher at $25,000 and AU$10,000 respectively.

So yes, the ability to invest as little as $250 through InvestNow and RaboDirect is a ‘value add’, however with the thresholds of most of these funds already relatively low, I wouldn’t say it is a huge ‘value add’ in terms of providing greater accessibility.

– Smartshares

As for Smartshares ETFs, you can buy units in these direct for as little as $500, so the accessibility benefit provided through InvestNow isn’t huge.

Sharesies is interesting. While it allows you to invest as little as $5, you need to make a more sizeable investment to simply cover its $30 annual fee.

For example, if a Smartshares’ fund’s returns after fees and tax is 5.79% per annum (as Smartshares’ NZ Top 50 Fund was in the past year), you’d need to invest $518 to earn enough to simply cover that $30.

Sharesies’ annual fee therefore really erodes its low barriers to entry pitch.


– Sharesies

If you buy units in a Smartshares ETF directly from Smartshares, you have to pay a one-off $30 application fee.

This means the upfront cost of getting diversity by investing in a number of ETFs can be relatively high for someone investing smaller amounts of money.

It is at this point that Sharesies can be beneficial, as you pay that $30 annual fee regardless of the number of funds you invest in.

Yet with Sharesies only listing six of Smartshares’ 23 funds, your ability to get diversity is limited.

The other upside of Sharesies is that you don’t have to pay a brokerage fee if you sell units in an ETF. If you did so through ASB Securities for example, it would cost you at least $30.

So in a nutshell, you’re paying that $30 annual fee to have the flexibility to buy and sell units in various ETFs without the cost that you would otherwise incur doing so.

– InvestNow

InvestNow stands out from the crowd in the cost department, as it doesn’t charge any fees.

So while you’ll pay $30 to buy units in a Smartshares ETF if you were to do so direct; you’ll pay nothing if you buy the same units through InvestNow.

You likewise don’t pay a cent for investing in the Vanguard funds or any other managed funds.

As with all the platforms, you do of course still need to pay the management and administration fees charged by fund managers. A fund’s fees will be the same regardless of whether you invest in the fund direct, or whether you do so through an intermediary.

The big benefit in my view of InvestNow being fee-less, is that you don’t have to pay a premium to diversify your portfolio.

– RaboDirect

RaboDirect is on the back foot in the cost department alongside InvestNow, as it takes a 0.75% cut of the amount you invest through it.

This fee is reduced to 0.50% if you make contributions via a Regular Investor Plan.

If you were to invest in a managed fund direct, you will in some cases also be charged “action” fees when you invest or withdraw funds. Salt will charge you 0.3% for doing so for example. 


While I have weighed up the pros and cons of various platforms in this piece, the important thing to consider at the end of the day is the quality and suitability of the funds on the platforms.

Who are they managed by? What are their track records? What is the risk involved? Are you getting true active management when you’re paying for active management? What are the tax implications?

Reading their product disclosure statements and getting advice if need be, is fundamental.

– RaboDirect

Asked how RaboDirect selects which funds to put on its platform, a RaboDirect spokesperson says it considers fund size, manager size, how long the fund has been operating, manager tenure, fund structure (e.g. PIE), and fit versus other funds on the menu.

They say it doesn’t have any intention of dipping in to the index-tracking fund space.

– InvestNow

Asked the same question, Mike Heath says those in the InvestNow team draw on their knowledge and experience. They also pay attention to customer requests.

Heath acknowledges there are a number of fund managers that still prefer to distribute their products through the traditional adviser model.

“But we won’t stop asking them [to join the platform],” he says.

Furthermore, Heath maintains there will come a time when InvestNow has the scale to make it more attractive to other fund managers. It already has more than $80 million of funds under management, with the Vanguard funds being the most popular.

He can’t say what the ideal number of funds is, but says it is important InvestNow considers how it can help navigate its customers through the options as it grows.

– Sharesies

Asked about how it selects its funds, Sharesies co-founder Leighton Roberts, says it has opted for Smartshares ETFs due to their simplicity.

He says Sharesies may look towards managed funds in the future, but doesn’t intend to be a supermarket of funds.

His goal is for Sharesies to “grow with its customers”.

The final important thing to remember with all platforms is that they can remove funds from their offerings as they please.

In this instance, InvestNow says: “We may then determine that the investment will need to be sold or transferred into your own name.”

For more on actively managed funds see this this piece and index-tracking funds, this one.

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