Double whammy: Investors face trading platform fee hikes after market plunge

Australian share trading platform Stake is to introduce brokerage fees from March 4.

Fresh off the back of plunging markets hitting the value of their investments, investors are now facing fee hikes by trading platforms, pushing up the cost of buying and selling shares.

Australian platform Stake, which has over 60,000 users in New Zealand, is to introduce brokerage fees on US share trading from March 4. Up until that point it has offered free brokerage, emulating popular US zero-fee broker Robinhood.

Stake will charge US$3 ($4.62) for trades up to $30,000 and 0.01 per cent of the value of a trade for those $30,000 and over.

A Stake spokesman said since it had launched in New Zealand in 2020 the economic backdrop and customer priorities had changed, “so it’s natural that our business and product evolves too. These changes strike the right balance between offering great value, while enabling constant improvements to our service”.

“We are letting customers know well in advance, so they can continue to use the current pricing structure until March 4, 2023, and if they wish, transfer their portfolios to other brokers at no cost,” the spokesman said.

Stake’s move follows that of New Zealand investment platform Sharesies, which told its roughly 600,000 users four days before Christmas that its broking fee would be going up for Kiwi users from the end of January.

Its changes will see investors’ average brokerage fees jump from around 0.5 per cent for trades up to $3000 to 1.9 per cent, while its foreign exchange fee will rise from 0.4 per cent to 0.5 per cent. The fees for New Zealand users will be capped at $25 for New Zealand shares, A$15 for Australian shares and US$5 for US shares.

It will also introduce new monthly plans which start at $3 a month.

The Sharesies announcement was met by a backlash from members on social media platforms. One Reddit user said the new fees were enough to push them to seek a new online service for New Zealand share investing.

“Sharesies shooting themselves in the foot big time here.”

Another said a nearly 2 per cent per transaction fee sounded pretty expensive. “I’m a small-time user, I put in $50/week since April 2019 (with the exception of a couple of lump sum investments eg March 2020) and have built about $7k in there, I know that the compounding effect of this is going to add up quite substantially over time.”

Others pointed out that Sharesies aimed to attract small investors but was now penalising them.

Sharesies co-founder and co-CEO Leighton Roberts.

Sharesies co-CEO Leighton Roberts said it was trying to set itself up for the future, more particularly with the introduction of plans and caps.

“There are people, depending on how you pay, that will see fee increases but on a dollar basis we have tried to manage that to be quite small.”

Roberts said more and more of its users were doing bigger-sized trades on Sharesies and it was starting to look less competitive. “And that’s not our intention.”

He said as a broker it was charged on a per-trade basis, not on the dollar value. “It doesn’t matter if someone puts a million dollars through the platform or puts $5, it marginally is the same amount of work and effort for us.”

Roberts said Sharesies set its pricing five years ago and had not changed it at all since it launched, but the competitor market had changed a lot since then.

“We have done this very much in mind that people should still be able to afford to grow their wealth in small amounts and we are trying to price it in a way that is fair to them.”

He said the plans favoured the auto-investing habit, which was cheaper for it to execute on.

“Sharesies is a wealth development platform over time and I think some of the complaints are coming from potentially more of a trading mindset, which is not what the platform was built for.”

Roberts said there had been a drop in trading volumes and the pricing had been reviewed to reflect the current market.

“The old pricing was quite volatile and we are aiming for something much more consistent than that.”

Christopher Walsh, founder and CEO of Moneyhub - a website aimed at allowing consumers to compare financial products and services - said Stake had appealed to people undertaking short-term trading.

“It was all very fine when things were free, you just paid these little fees that were regulatory fees. And now it’s US$3. So it really depends on the investors. If they have got US$40 of a fractional Tesla share or they have gone and bought US$30 of penny dreadful shares - suddenly they are paying 10 per cent fees to sell those. This is quite a significant change because it was a fees-free platform that’s now going to have fees.”

Money Hub founder Christopher Walsh.

Walsh said he believed it had come about due to pressure on the business. “They need to run a business - I totally understand that - and not charging for what you sell is problematic or needs to be addressed.”

He said this was the beginning of the end for “freebies”. “Free was very attractive but obviously isn’t sustainable.”

Walsh said NZX trading data showed trading via Sharesies had dropped because of the tough markets and that was likely a driver behind the fee increase.

A lot of people had bought shares but were not professional investors so may not have kept track of it, he added.

“Once it starts going down and down and down you lose interest, you don’t put any more money in.

”If they had increased [the fees] during the boom in markets it would have been OK but increasing fees when markets are bearish... it’s not a good look for investors [who are] just existing.”