• Peter Lyons teaches Economics at St Peter's College in Epsom and has written several economics texts. The views expressed do not constitute personalised financial advice and are not directed at any person. Past performance is no guarantee of future performance.
I am not a huge fan of the sharebroking industry. I am required to use a broker to be able to buy and sell shares on the NZX. But like real estate agents and car salesmen, the primary objective of sharebrokers is generating fees through more transactions. It is in their interests to encourage their clients to buy and sell shares because they clip the ticket with each transaction.
Having set up several share funds with my students in recent years, I have a healthy scepticism about the fees sharebrokers charge in New Zealand. They are remarkably similar among the few sharebroking firms. They are also high, especially for small-scale investors. This can discourage young people from exploring the possibility of investing in shares. Yet it is crucial they are exposed to the principles and realities of investing not just for their own personal gain but also for our future national prosperity. As a nation, we are remarkably financially illiterate. This is costing us dearly.
Our financial ignorance is partially a result of an education curriculum that has largely been shaped by university pre-requisites. Practical financial skills have not been taught in our schools or tertiary institutions. People are left to try to teach themselves or rely on financial advisers, sometimes of dubious motives and ability. The financial sector is an environment that tends to attract sharks.
From a national perspective, our financial ignorance is damaging. The aversion of many Kiwis to investing in shares has meant many of our most profitable and exciting companies have been bought up by overseas interests. This means their profits disappear offshore. It is these businesses that generate actual jobs, incomes and output, far more than real estate.
