Why can’t investing be simpler
I started self-directed investing around fifteen years ago when I began working as a contractor and lost access to workplace pensions. I’ve always found it a challenge to balance life’s everyday commitments while finding time to manage my investments. It’s not that beer with friends, weekend’s away, mountain biking and the odd gig were priorities over securing a future for my family. It’s just that allocating time to invest, even an hour at the end of the day, felt not only challenging, but an impossible chore.
Not that I dislike investing, far from it. It’s just the whole process of reaching my investment goals seemed endlessly difficult to achieve. I’m not a trader and have little interest in monitoring platform dashboards to track my investments. In essence I became disillusioned with the very act of investing with all the research and monitoring that it entails. Unless I pay someone to do it for me, which many, if any, of us aren’t in a position to do.
In 2020 Statista reported that globally there are 7,602 ETF’s and between 2008 and 2019 122,528 open-ended funds and don’t forget the equities, FX and cryptos. With so much choice out there, how can you make the right choices? Life is moderately easier for an experienced investor as they know the apps and websites to dig out their leads, as well as the right contacts, but for the everyday investor, especially someone starting out, it can be a daunting experience.
As for monitoring, well that’s a whole other minefield or if you excuse the pun, mind-field. The growth in available apps has been both incredible and astounding. Incredible in that the number of options amazes and astounding in that very few really seem to offer investors like you or me the help that we really need.
How are you supposed to understand the performance of your investments if none of the platforms are calculating it? Why can’t you easily access the facts and insights that allow you to make better decisions? When things start to go wrong, why doesn’t the platform tell you? And I’m not just talking about market price fluctuations here. I’m talking about real life events that deep down you know will impact the true value of your investments.
Nothing much appears to have changed in the platform space over the last ten years. Innovation has completely dried up, and all that’s new is low cost or apparently free trading and fractional shares. Great news though, sign-up workflows have become more streamlined, international markets have become more accessible and bigger buy buttons have made it easier to lose money. It’s hardly the revolution required to make investing easier, is it? After all, it’s your hard-earned money that goes into an investment, with the hope that it improves your future somehow, and this first step is just one of many that you about to take on an uncertain investment journey.
The market is responsible for the lack of innovation
Last week I felt heartened as I read Spiros Margaris’ article on Sifted, “Are fintechs best days behind it?”, where he suggests that the current fintech stars are likely to become the future incumbents.
Incumbent institutional players have struggled to change and adapt. Legacy platforms combined with the “we’ve never done it that way” attitude hinder change. You have to understand that the huge systems, and the highly regulated environment in which they operate, make for massively complex change processes. When you have millions of real customers using your platforms, failure and downtime are not acceptable outcomes and this leads to an inability to move quickly.
This can be seen in the banking sector where aggressive start-ups have moved into the market and have been taking significant market share. Remember 2007? Frightening wasn’t it. But it didn’t half make us more savvy about saving and crucially it made us all very angry. People started to raise questions and demanding change, but the trust had already been broken. I’ve worked within some of these large organisations. They want to change but the technical legacy they carry makes them slow and challenging to transform. Also change is unsettling. It’s messy. Most have multi-billion-dollar transformation programs with little to show for the money they have spent. Dynamic start-ups have been able to take advantage and, built on trust, they have opened up a three to five year first mover advantage.
The platform market is much the same. The reality is that start-ups haven’t needed to innovate. Minimum deposit entry barriers prevented younger generations from even thinking about investing. With historic low interest rates the market for young investors has been growing for years. House price inflation has been higher than interest rates, making it difficult to accumulate enough savings for a house deposit. Young investors have been screaming out for the opportunity to accumulate savings for years but have been ignored by the market.
Start-ups have removed most of these barriers and next generation investors have flooded the market, but the same questions are still going un-answered and investors are still being ignored. If the future of investing looks so great, why aren’t platforms providing the opportunity to invest well, securely, and with the tools that allow us all to invest with confidence?
It’s about time (and it’s your precious time) that an investment platform stands up and not just answers these questions but provides the answers too.
