Transcript QAV 357 – Doug Morris, Sharesight

Filename: QAV 357 – Doug Morris, Sharesight

Duration: 49:38

Cameron: 00:03  Oh, well, I’d like to welcome to QAV Doug Morris, the CEO of Sharesight. Those of you who aren’t familiar with Sharesight its portfolio tracker basically for Australian investors. Doug’s accent, nonetheless so you’re not from around these here parts Captain Morris?

Doug:  00:24  No, I’m not. Sorry to disappoint with my rather grading Midwestern American accent. I’m from Chicago originally, well I went to school in Texas, spent some time in Paris as a student, but I’ve been in Sydney since 2007. So, I’m a dual citizen, which means I can make fun of both Americans and Australians at the same time.

Doug:  00:47  Joined the club. I’m not, but I’m married to an American so I think that gives me the right to make fun of Americans.

Doug:  00:55  It’s easy pickings these days.

Doug:  00:56  So before we get into the Sharesight story tell us about your story. What brought you to this part of the world?

Doug:  01:02  Sure. So, I joined an international business development program with my employer back in 2007, who was Morningstar at the time, the investment research house. So, they were looking for young guys to sort of join up and help kind of spread the business I suppose, around the world and so I was given the option of moving to Toronto or to Sydney and being from Chicago, there was no way I was going move to Toronto so I picked Sydney and I’ve been down here ever since.

So, my background with them is in sort of bizdev, but also in product management. So, helping to kind of commercialize their equity and credit research business units, and so I did that globally, and I did that locally here too to dealer groups and IFAs and family offices as well, and along the way, made a few connections and in 2013 I agreed to join Sharesight then as general manager and was promoted to CEO in 2015 where I’m an investor as well. So that’s kind of how I got here I suppose.

Doug:  02:08  Is Sharesight a US company, or was it an Australian company?

Doug:  02:11  It’s actually neither. Sharesight’s a Kiwi company. So Sharesight was started by a father and son happy to get into kind of the founding story if you guys like, but it’s founded about by a father and son in Wellington. They gained a little bit of traction in New Zealand and then in Australia as well. The former CEO of Morningstar Australasia who was a gentleman by the name of Andrew Bird, he started a company called Aspect Financial merge that with Aspect Huntley, Huntley’s Newsletters, which you guys probably know.

They were acquired by Morningstar which is how I got to know Andrew. He was the CEO and I was working there. He then exited and found Sharesight, invested in the company and then brought me along with, to run it basically. So, it’s actually a father and son team from Wellington who started it, even though it’s sort of crawling with people like myself and other people from around the world these days.

Tony:  03:01  Is the Kiwi connection how you got linked with zero or is there some other story?

Doug:  03:05  Indeed. Yeah. So we actually through, you know, new Zealand’s a pretty small place, especially in in Wellington, and there was a mutual connection with the founding team, the father and son with Rod Drury, and they were kind of just shooting the braves one day, and they mentioned to Rod that you know, they were thinking of starting this cloud-based share tracker, which at the time the cloud-based phenomenon was pretty novel and they say no way I’m working on a cloud based accounting system, and we’ve got this kind of philosophy on, you know, having this constellation of apps and an ecosystem of ad-ons, and we were one of the first ad-ons ever in the xero marketplace actually. So, you know, we really got a boost in the early days from our association with zero, but we continue to today as well.

Tony:  03:49  Good. So, there are other portfolio trackers out there and some people will use Stock Doctor is another tool that we recommend and use and as a portfolio service, and that. What’s the elevator pitch for someone to use? Your platform rather than somebody else’s?

Doug:  04:07   Yeah, sure. So essentially, we focus only on the tracking and the admin of

portfolios. We operate a SAS business software as a service with a freemium model. So basically, there’s a free version you can try, if you like what you see you can upgrade, and that’s it. All of our revenue comes from subscription revenue from selling the tracking software. We don’t provide broking services or research or tips of any kind. We just think the software is good enough that people will pay a modest amount for it and that’s how we operate the business.

We focus on data aggregation, so you can link in as many brokers as you use to get all your trading history into the software, we focus on performance analytics and then we also provide the tax reporting as well. So, in that respect, we sort of sit alongside, you know, some of the reporting features you might find on a wrap or a platform yet we’ve sort of stripped that out and we’re offering that to DIY investors specifically.

Tony:  05:02   Did I have to link to zero, or can you be independent of zero running Sharesight?

Doug:  05:06   No, totally independent. So about 15 or 20 percent of our user base linked to zero, but now the systems work independently of one another, but for, you know, if you’re an SMSF trustee with a hands-on approach to your portfolio, it is a really good connection because you can send through all the trades and dividends and everything else just comes right through and all the reconciliation is done on the zero side.

Tony:  05:29   I have to say on a user and a convert, we started with zero, maybe three or four years ago because funnily enough, I was living in Toronto and my bookkeeper was still in Australia. So, it was really a nice repository to track everything, and then yeah, earlier this year we started using Sharesight as well, and it’s worked well for us.

Doug:  05:52   Thanks. Appreciate it. Yeah.

Tony:  05:52   What about data from overseas? So, if I had some US shares, for example, how does Sharesight handle that?

Doug:  05:59   Yeah. So, we track about 30, I think it’s just above 30, now 30 global stock exchanges around the world. So, we’ll track the NYC, the NASDAQ, the AMEX, the pink sheets, all the major North American and European and most of the major Asian exchanges as well. So, our focus really, we’ve got really good traction and penetration in the Australian self-directed investment market, but where we’re also quite strong is kind of sort of expat community, you know, you can imagine there’s people in Hong Kong who have a professional services background in New York or Sydney. Therefore, we kind of have to have all those global data sets to cater to that crowd as well, and in addition to manage funds in a few of those key markets too.

Tony:  06:40   Yeah. Right. So, you given that you’re catering for that kind of market there, is there a minimum size portfolio that you would recommend that someone has to have before the service is worthwhile?

Doug:  06:50   No, not at all. So, we don’t charge on asset based fees or anything like that. So, it’s a flat subscription price similar to like a Netflix or a Spotify really and what we find is if you look at our kind of our user base by age, you’ll find kind of a clustering of young investors sort of beginning their investment journey. These are millennial investors known as the robin hood crowd dare, I use that phrase.

Tony:  07:15   Superhero.

Doug:  07:15   Superhero. Yeah, exactly. Yeah. You know, they’re comfortable online, they’re sort of conditioned to look for solutions like Sharesight online, so it serves their purposes. They like to hang out on the free plan, we’ll show performance, we’ll do some of their tax form as well and then we have most of our paid based though is toward the higher net worth end of the investment spectrum, and so typically what you might find there in Australia anyway, is somebody, you know, running the rest of MSF on Sharesight that might be linked to zero, or they have the accountants in there as well, come tax time.

They’re tracking usually two to three investment entities for a client on there as well and that the median portfolio size is about half a million dollars. So, if you think it’s two or three portfolios, you’re sort of north of a million dollars in terms of you know, invested assets for a typical Australian customer on Sharesight.

Tony:  08:06   Right, and that’s one of the good things I like at Sharesight is the consolidation feature.

Doug:  08:10   Yeah, indeed. So, we do make it a point to make it easy to kind of get your data in and then run consolidated reports for kind of an overall wealth view as well. Yeah.

Tony:  08:18   Yeah. So, consolidation is a really handy feature I think, especially for me, it helps me to produce reports like what the compound growth is for the portfolio over time.

Doug:  08:29   Yeah.

Tony:  08:29   So that’s really useful and that’s important to me because you know, I track it against other benchmarks, which is, good and you know, I’ve been doing it manually myself. So, it’s quite simple.

Doug:  08:41   Yeah. Most of our converse have come from spreadsheets actually. I think its around 70 percent of people which you know, is difficult sometimes to kind of market to people who are used to an offline solution, but once they come across, we also find that they sort of like to quietly maintain their spreadsheet in parallels, which is fine, that’s totally cool. We do quite well sort of the software here or the medical doctor crowd they like to kind of have a hands-on approach to their data.

Tony:  09:11   Well, this is our second run at trying to find a platform to track our performance with and track our tax, et cetera with the first time we use somebody else and I won’t say here they are, but both times we kept running the spreadsheets manually in parallel just to parallel testing’s and the other crowd fell over really badly and I was really glad that we kept those spreadsheets going. So, we turned off the spreadsheets at the end of the financial year, this year with Sharesight because it’s working well for us. Although the good thing about Sharesight is the compound growth calculation for the end of last financial year was 2 percent higher than my spreadsheets.

Doug:  09:52   There you go.

Tony:  09:52   Yeah. If you can just get in there and give it a tweak again next year that’d be great.

Doug:  09:56   Yeah, and you can always export data into a spreadsheet as well. I mean, we do take a very open kind of ecosystem view towards everything, kind of the anti-platform play, right. We don’t want to be in a walled garden. You can put in the assets you want, take what you want out, combine brokers, et cetera, so.

Cameron: 10:11  For our audience, we run a demo dummy portfolio. I was wondering Doug, if I put that and I just run it on a Google sheet that you know, our subscribers can see. So, we have full transparency of what we’re doing if I put that into Sharesight can I share that with Sharesight and I make it public?

Doug:  10:37   You can, yeah.

Cameron: 10:38  Right.

Doug:  10:38   We can talk about that offline if you’d like, but we do have a feature in the software where you can share a portfolio with as many people as you like. So, I need an email and it sends off an invite and they can view it, and in this case, it sounds like it’d be a read only, so you can make it read only for them, and you can broadcast that out to as many people as you’d like.

Cameron: 10:57  So I can just publish a URL for our subscribers. Go, if you want to see our portfolio, have a look at this.

Doug:  11:03   You can’t do that at this time. Although we actually do have that functionality, but it’s sort of not public, if you want to talk more about that, we could actually do that for you or you could just share access individually with those email addresses. Yeah.

Cameron: 11:16  With thousands of people, that’s going to be a little bit sort of complicated.

Doug:  11:18   Yeah. Well then, we can talk about the URL, that’s…

Cameron: 11:23 That’s the secret, yeah, the secret, the back door.

Doug:  11:26   Yeah.

Cameron: 11:26 Give me a backdoor job, Doug. Yeah.

Tony:  11:29   The dark Sharesight.

Cameron: 11:30  Yeah. Sorry. I didn’t mean to interrupt.

Tony:  11:35   No, that’s okay. Well, you’ve raised the question. One of the things that make life complicated for the dummy portfolio that we run is every now and then something gets taken over. There’s a special dividend, there’s a return of capital. It’s almost like there’s many ways you can think of meddling with a share portfolio. Some company will think of another to make it more complicated, and I think one of the things that has always steered me away from platforms and towards Excel is that I can do those special dividends or takeovers myself. So how does Sharesight handle those one off situations?

Doug:  12:09   Yeah. It’s a good question. The tail is very long of the corporate actions, right? That you have to worry about as an investor. It seems simple at first, but it gets pretty gnarly and especially think about, you know, you can go back 20 years in time on Sharesight so it is very important that we give people the ability to edit those corporate actions themselves, and so the approach we take is we automate what we can, right?

So splits name changes, basic consolidations, things like that we’ll do automatically for customers, and we’ll alert you when that happens, but when there’s an, what we call an unhandled corporate event that comes along, you know, where, where the investor might have to make an election, right as to what he does, we will typically publish some blogs and some help articles about kind of what’s going on with links to the actual official documentation, and then we’ll point you to which tool you can use inside the software. Is it a return of capital? Is it a special dividend?

Is it, you know, a de merger, we have tools and wizards for all of that and we’ll step people through each one and in our cases, as we onboard more and more customers? They always go back in time to recreate those portfolios and so that means we get a little bit better each time when people ask us, oh, hey, that nasty Westfield thing that happened a couple of years ago, this Sydney airport one that’s one that never goes away. Right, and so we kind of refine our documentation for people as we move forward. So yeah, we do give people the ability to do that stuff if they’re capable or the accountant.

Tony:  13:37   That’s good, and we’ve had some experience with that. I mean, the Elisa Gold takeover that we had to manage for the dummy portfolio Cam, we were able to talk to someone from Sharesight that talked us through how to handle it in our portfolio, which was good service. Yeah. So, I mean, that’s corporate activity. What about currency moves and tax reporting, if there’s different jurisdictions, how does Sharesight handle those things.

Doug:  14:01   Yeah, currency’s a big one, and it’s one of those things where currency is sort of, it’s a bit in the eye of the beholder, right. Are you talking about currency because you’re investing in foreign markets? Are you talking about actual Forex holdings as an investment position? Are you talking about a cash hold? Right. We do all of those things quite well. So, we have daily exchange rates from a provider.

So, we track the currency conversion on the way in and the way out of the investment, and we’ll do so every day along the journey as well. So, we can show you the impact of foreign currency on that particular holding, whether it’s, you know, adding to it or detracting from it. We’re just about to release a new feature, a multicurrency evaluation report, that will show you on a comparative basis what your portfolio is worth in, you know, currency A versus currency B, for example.

As we have a lot of investors say in the States or in Canada who has, you know, foreign currency holdings across border, that’s very common in the UK and across the European union as well. So, we do provide feature for that stuff and it is quite complex actually when you open the bottom of this stuff.

Tony:  15:12   Yeah. It’s almost as complex as the stock market, and I thought you just reminded me there to mention the fact I can also consolidate my bank accounts live into the Sharesight portfolio. So, I get a total picture as well. Do I need a zero account to do that or can I do it standalone?

Doug:  15:29   Yeah. So, in your case, what we’d recommend there if you have a zero account or your accountant has a zero account with you, when you sync the two systems together, you can pull back in the bank feeds the bank accounts right into Sharesight. So, you can have your share portfolio, right. That’s coming in from the broker, and then it’s a separate line item that portfolio you can have say you know, your whatever, COMSEC, CEIA cash management or something like that so long as you have that set up with zero, we’ll read that information back.

Tony:  16:01   Yeah. That’s how we’re doing it too. So, you need to be in zero for that you can’t do it standalone?

Doug:  16:05   There’s a couple of other ways you can handle cash with Sharesight. So, we also have a direct integration with Macquarie CMAs. Now that’s for our professional audience Macquarie doesn’t make those accounts available to the retail audience, unfortunately or we have a cash feature as a standalone feature in the product where you can create a cash account and you can give it a balance, give it a currency, add transactions. You can also sync that to your buying and selling and your dividend activity kind of acts as a proxy inside the software for what’s happening inside the bank as well without sort of boring you to death. The world of bank feeds and getting access to that transactional data from banks really, really difficult, and it’s almost another business unto itself, that’s how zero was built, and it’s kind of an area we sort of let others do like zero because they do it really well.

Tony:  16:55   That’s really good. Zero is an impressive accounting package, and we can invest in that ourselves as stock market investors in zero on the stock exchange, is Sharesight listed somewhere or is it a private company?

Doug:  17:07   No we’re not. Not yet anyway. It could be that you know, down the track, given the nature of what we do, you know, we provide a service for share market investors. I personally see that as sort of a nice serendipitous way to kind of take the next step, you know, for the product. We have sort of engaged in similar activity though. So, we’ve raised capital raised in March of this year and we raised it last in 2015. We actually did so by inviting our own customers into the process, we ran a little bit of a crowdfund if you like amongst our own user base, and that was a really successful result because it just kind of helps build that alignment between the user base and kind of where we want to take the business really.

Tony:  17:48   Yeah. It’s pretty hard to move off the platform if you’ve got shares in it.

Doug:  17:50   That’s right.

Tony:  17:53   Yeah. That’s good. So, speaking of the business itself, I mean, it’s an impressive product now at what stage of its lifecycle or development, do you see it as? Is its early stage yet?

Doug:  18:06   Yeah, you can’t classify it as early stage anymore because the truth is, is that the father and son team Tony and Scott, they first launched the product back in 2008, 2009, actually. So that was the first cut of the software for New Zealand investors, and it’s undergone you know, a lot of change and some overhaul since then, obviously, but they really ran it as a very small business as a technical business, it’s always been a product led business. So, it wasn’t until more recently where we actually raised enough capital to build up a proper marketing team and to really kind of give it a go. So, we’re kind of on that sort of hockey stick of the adoption curve and long may it last, and so it’s kind of the most exciting time that I’ve experienced at Sharesight in my seven years here. So, we’re, you know, about 35 staff now, and we’re just about on 200,000 users as well, and it’s growing very, very fast. So yeah, so it’s pretty exciting phase for us really.

Tony:  19:04   What sort of plan developments can we expect from share site in the near future?

Doug:  19:08   Yeah. So, one of the areas we’re focusing on a lot is I think just overall usability. So, one of the things that it remains a challenge and an opportunity for us is the whole fact that people don’t have an alternative. Like most people do this stuff in a spreadsheet, right, and most people, they have assets with broker A, broker B, maybe on a platform what have you. We really want to make that user experience really slick, and we want to get to a point where we’re really proficient at the onboarding experience. So, we want to enable you to kind of add in all of your assets to track on Sharesight.

So, it’s that aggregation play that we see is really important and definitely we’ll be focusing on kind of what we call the expert plan area as well. So that’s kind of tat higher end of our self-directed investor offering. I think you can expect more advanced performance reporting and analytics there, benchmarking maybe some risk analysis stuff and a feature that’s come up in a survey as probably the most popular, and this was no kind of promises that we’ll build is more custom reporting as well. You know, investors have a particular way, they want to view the kind of the setup. So yeah, we’ll probably be looking into that area in the new year as well.

Tony:  20:20   Yeah. Cool. I mean, I have this sort of view of a product like Sharesight, maybe 10 years out where it’s almost AI driven where, you know, every week you get an email saying, hey, dummy, you should have sold that share last week, or it’s outside your guidelines for how you want to invest or something like that, is that coming?

Doug:  20:38   Absolutely. You know, we have enough of a user base now where the system can be really smart. You know what I mean, if we sort of trained our attention on that and I think you know, AI, I don’t want to be the tech CEO banding about terms like AI because often those are misused, but I actually do think there’s quite an opportunity for us there as well and if you think about kind of, you know, we are taking the same approach at zero, right?

So, we have our own API and we have about 25 or 30 API partners connecting into Sharesight so brokers and small fund managers, but there are some other kind of FinTech applications in there as well that, you know, you could imagine you know, a startup broker or somebody kind of trying to identify opportunities, you know, connecting to your Sharesight account, and it can kind of read your portfolio and give you tips and suggestions, you know, when you are in control of that. Right. So, you’d be authorizing the access and running that yourself.

Tony:  21:33   Yeah, and likewise, as you say, there’s a user group. So, I imagine that’s a marketable commodity to, you know, Pricewaterhouse or a KPMG to come in and provide tax service on mass for a cheap rate or something like that.

Doug:  21:46   Absolutely. Yeah. There’s opportunities for that as well, and so three of the big four are using Sharesight in their own, right for their own high net worth clients and they extract a lot of data from our API and they put it inside their own reports or their own software, for example, so yeah.

Tony:  22:02   If you have a large user group and say, we’re just talking maybe about one set of that like self-managed super funds, could you anonymize the data and say like the average super fund is this big and it’s returned last year was this, and it’s got a breakdown of allocation of assets that looks like this pie chart sort of thing.

Doug:  22:17   Absolutely. So, we already do that. Now, if you go to the Sharesight’s blog, you’ll see that we on a weekly basis show kind of top 10 buys and sells in various patterns and trends, that’s all done on anonymized data. So, just to be clear, the people who produce those charts have no idea where that data comes from. It’s all totally anonymized, but yeah, I think we could get to a stage where, you know, with the power of our user base, you can almost opt yourself into a cohort, perhaps even investors like you. Right, and you could kind of build an anonymized benchmark to understand kind of where you fit in terms of investors with similar investing characteristics as yourself. I think that’s a really exciting area and it’s probably the area we need to hire some really smart data scientists and to figure out how to do it.

Tony:  23:00   Yeah, right or even getting our QAV users onto it to form a group. Yeah.

Doug:  23:04   Sure. Absolutely. Yeah, absolutely.

Tony:  23:06   So the question, I always ask someone like yourself is how do you invest and what kind of journey have you had? What kind of returns do you get?

Doug:  23:16   Yes. Yeah, sure. So, I’m a kind of a long-term investor given my age. I’m 39 got two little kids, bought a house recently. So, my ability to invest at the moment is not as great as I’d like it to be, but my philosophy is pretty much core satellite. So, I like to keep kind of a bedrock of blue-chip shares or ETFs. Right, and then I kind of set and forget, and then I kind of make more strategic satellite plays and I am hopelessly overweight technology. My wife works at Google and I run a tech startup. So, we are leveraged to the hill when it comes to our tech plays as a family here in the Morris household, but I do love investing in tech companies because I do feel like I understand that, right.

So, I really liked the software as a service space, the SAS space. So, I’ve owned zero for a number of years for example, I liked the company Workday, certainly Zoom, companies that I kind of understand and I like to use to invest in companies where we use the products as well. You know, so when I read the annual report, I kind of really put myself inside the CEO’s office to understood that business. So yeah, so my returns, I suppose, my annualized return is sitting at about 36 percent right now Sharesight, which I’m pretty happy with.

There’s also a pretty strong flavor of some of the Chinese tech names in there, the Alibaba’s the TenCent’s, although I don’t know, I’m pretty nervous about some of the political activity over there in terms of, you know, the stopping that IPO for example, that sort of set a chill down my spine. I may have to recalibrate my portfolio and buy some Microsoft instead.

Tony:  25:00   Yeah. Cool. That’s great.

Cameron: 25:02   So I did have a look, Doug, at a report that you guys put out just recently sort of a 2020 insights report, and I wanted to ask you a couple of questions about what you guys have seen over the seven or eight years you’ve been in the business in terms of trends in investing in Australia. One of the things I saw in this report is it says new investors are increasingly women. Do you have any insights behind why that might be?

Doug:  25:36   Yeah. So, one of the things that came from that data point came from the ASX and some of the work we’ve done with them on, you know, sort of assessing the market and I think it was 45 percent of the new entrance into the market were women for the last 12 months, which is much higher than it’s been historically. In fact, if you look at the split of customers on Share sight’s, its kind of 70/30 skewed towards males. So, I think it’s really exciting because there’s a whole bunch of people in the population who, you know, ought to be investing basically.

I don’t necessarily know why that is. To be honest with you, I think some of the things cited by the ASX were a basic lack of trust in traditional financial services, you know, be they, you know, bank aligned dealer groups or wraps or platforms or things like that, and no doubt some of the findings from the Royal Commission sort of help keep women investors at bay, so that is one thing that we are seeing, but also, I think investor participation levels are just increasing across the board, right? So especially younger investors as well. So, no doubt that that’s increasing the share of female investors as well. So, I think it’s a great thing.

Cameron: 26:51  Right. Okay. So, you also had in this report that Australian investors view financial advice positively. That’s an interesting finding.

Doug:  26:57   I found that interesting as well. So, we have a professional edition of Sharesight as well that’s used mostly by IFA and family offices and accounting firms. So, we kind of have a bias look at that part of the market and what we see there are really good advisors who are charging fee for service, right? They’re building model portfolios and they’re low cost, you know, ETFs and shares.

So those guys from what we see do the right thing by their clients, you know, they’re inviting the client into the portfolio to take them on the journey. It’s very transparent, which is sort of the antithesis of the vertically integrated, you know, platform, bank, world. So, but yeah, I was surprised by those findings as well. You know, I think certainly there’s still a need for advice out there. You know, the question is, do people trust the industry enough to go back and find some and how do they find a good advisor from a bad one.

Tony:  27:49   Yeah, I think there’s that, but I think there’s a couple of wrinkles which are going to happen before the hiring commission comes to conclusion because, well it’s been postponed now, but it was meant to have come in by now where you had to have a university degree and a certain amount of time in the industry before you’d give advice. The financial advisers who you were talking about who offer bespoke advice are charging at least 5,000 dollars at the first meeting because they have to produce legally a statement of position for the new client so they can show they understand them, and all those things and the fact that the hiring commission wants to rule out the vertically integrated model, although that’s still up for debate. There’s a whole majority, I think of the population who aren’t going to be locked out of financial advice unless the change is made, and I keep talking about robo-advice, but no one’s cracked that egg yet.

Doug:  28:43   Yeah. It’s a tough one to crack. I mean, I really liked the spirit of robo-advice. We have a couple of robo-advice partners who use our software for their own reporting. I love that. I love that concept, but you know, yeah, I mean, there’s been some very, very large investments made in robo overseas as well. Those businesses are very large. I’m not sure if they’re turning a profit yet. I haven’t looked recently, but you know, you can kind of do the math and you need to manage a lot of assets to make that business profitable. So, it’d be quite exciting to see what’s going to happen on the robo space as the Vanguards and the Schwabs kind of move into the 0 dollar robo kind of world with, you know, packaged ETFs and things like that. So, it’s quite interesting space.

Tony:  29:28   Yeah. The problem is at the moment, is I still, even in the robo space, as it stands, I still have to get that statement of position workout, which is a 3 to 5,000 dollars exercise, even for a robo-advisor.

Doug:  29:40   That’s right. That’s where I really see like robo, you know, it was kind of the bedrock investment strategy for people as they’ve kind of go on their journey, you know, hopefully at some point there’s a need for Sharesight, if there’s more discretionary investing happening, but then there’s, you know, household budgeting requirements and, you know, there’s all kinds of different services that can kind of join together on this stuff. Really like an app store kind of play that’s kind of how I see it playing out. Hopefully that’s helped by initiatives like open banking, but I still think it comes back to education, consumer and investor education way back from like, you know, high school days, honestly, so.

Tony:  30:17   Yeah. There’s a bit of a gap there. We bemoan that fact as well, but I also think there’s a space in the market. Well, I think it could be filled one of two ways. I think the government could open up the future fund to your, I call them basic investors. So, the people who should be investing in like an ETF product, that’s low fees.

So, you just take your money and go straight into the future [inaudible 00:30:38] the fees, the lowest in market zero and you’re not going to shoot the lights out, it’s going to be safe and you can retire off it, but that’s one way to go. The other way to go is for someone to basically set that up as a process and then sell it to people for very chicken out, like the Kmart type of financial advice where it doesn’t matter what your statement of position is. You come to us, we’ll set you up on a single fund. It’s kind of invest in an ETF and that’s it, and the fees are going to be very close to zero as well.

Doug:  31:07   Yeah. It’s sort of like, you know, the ING bank account model of superfund investing perhaps, right? So.

Tony:  31:13   Yeah. So, it will be interesting to see how it rolls out, and there’s also a counter. There’s going to be a couple of counter-intuitive things like when I talk to people in the industry, I hear overwhelmingly about the best financial advisors and wealth planners in the industry tend to be the gray haired old man. People like myself who are in their 50s, who’ve seen it all. Who’ve been through recessions and they give the best advice because they’re talking from experience, but we’re the ones who are going to be exited from the industry because we don’t have the university degree and we don’t have the qualifications that the government’s looking for.

Doug:  31:49   Yeah. It is interesting. I remember my days with Morningstar, you know, all the research fundamental research was great from the analysts. Most analysts were, you know, younger people, and when I say people in this case, our clients were professional investors. They really wanted the gray hair overlay, you know, kind of that, just tell me what’s going to happen in your best, you know, assessment as to what you think is going on here, you know. There’s a lot of value in that experience, editorial overlay, I think.

Tony:  32:15   Yeah, and it’s not just what’s going to happen. It’s like we were talking about tech stocks before, and I know you’re all in with tech stocks, but a gray haired old man might say, well, you know, I’ve seen that bubble before and sure. Having exposure to it, but you might want to also consider something else as well.

Doug:  32:34   Yeah. They don’t pay any dividends either, so.

Tony:  32:37   Well, yeah. with them unless you sell a bit [Inaudible 32:37].

Doug:  32:42   Yeah, exactly.

Cameron: 32:42  So, getting back to insights before we wrap up then Doug what are you seeing across the board with, you’ve got a very large user base, a lot of data flowing through, you must be seeing some interesting trends emerge. You got anything you can thrill us with?

Doug:  33:01   We are. Yeah. So, in the years that I’ve been at Sharesight, we’ve seen a few things kind of emerge as I guess, durable trends. One of those is ETF usage. So that’s gone from single digit percentages to right up to about 20 percent of Australian portfolios own ETFs. Now I think the number overseas in the States is like 60 or 70 percent because they’ve kind of replaced mutual funds, managed funds over there in other respects. So that’s definitely a trend that’s kind of continuing its march.

Another trend is definitely more of an allocation towards overseas stocks. So again, that was 4 or 5 percent of your average SMSF trustee’s portfolio that’s really increased up to around 20, 25 percent of those portfolios as well. I think that’s held back a bit of course, by the dividends and franking credits that that trustees, you know, rely on locally, but that’s certainly increased as well, and I guess a more, I guess immediate trend is the absolute ravenous appetite that investors seem to have for the buy now pay later stocks, which if you have a look at our charts, typically top the most active by buyers and sellers. That surprised me, you know, I mean, I get why those things are popular, but even amongst say an SMSF trustee using Sharesight to be buying and selling companies like After pay says, it’s quite interesting I find.

Doug:  34:38   It is interesting isn’t it? Especially SMSFs which are meant to be you know, solid safe there for your retirement.

Cameron: 34:47  Yeah. What else in the year of COVID have you seen because we’ve seen with our user base that’s growing this year seems to be a lot of people investing more seriously this year than they did last year. What have you seen COVID doing to investors?

Doug:  35:08   Yeah, so I guess you know, I guess I feel quite guilty about this, but COVID has been good for our business. It’s created a lot more sign-ups say on a year on year basis on Sharesight, so it’s definitely showing demand for share market investing, and I think it also speaks to sort of all this cash kind of sitting on the sidelines, right? Whether it’s people that can’t find a meal anywhere else, or they’re not able to buy a home or something like that. It just seems like that cash COVID and the dip that the market took there in March was finally the impetus for people to come pouring into the market.

So, we have indeed seen them. We reckon about a third of our new signups during that time we’re kind of younger investors just getting started. So that that’s been a trend that we’ve seen and their portfolios have dramatically different from say your average SMSF trustee portfolio which is you know, very tech dominated to the younger folks and more stable for the older ones, except for those buying out pay later shares.

Tony:  36:11   Yeah. It’s interesting isn’t it, I went along to the online ASA Shareholder Association Conference, and one of the speakers there was talking about the domination of the workforce by millennials, which is getting close to a peak. So, I can imagine you’ll start to see more and more of that come through with their share ownership really isn’t it?

Doug:  36:31   Yeah, indeed. Look, I mean, I’m 39, I’m actually a millennial.

Tony:  36:36   Yeah.

Doug:  36:36   So I mean, I’m the oldest millennial. I remind my board of directors about that during board meetings, when they, you know, sometimes have not generous things to say about millennials, I kind of raised my hand and say, hey guys, don’t forget that your CEO is indeed a millennial too, but yeah, no, I mean I’m 39, I’ll be 40 next year and I’m a millennial. So, it’s you know, the demo, the demographic is aging, right so.

Tony:  37:00   Yeah. That’s very interesting. Isn’t it? So, you talked before about the cash holdings due to COVID or people coming on with cash holdings around the time of COVID. Is the cash holdings higher this year than it was last year or has it reduced?

Doug:  37:15   It is, yeah, it is. We still see quite a bit of cash sitting on the sidelines if you can believe it or not. So, I think what you saw was when the market did its real steep dive in March, you saw a lot of new entrance to the market. You saw a lot of purchasing stocks at finally people considered fairly valued or even, you know, undervalued, and I don’t know, I sort of assumed that, well, I guess all assumptions made in March it probably turned out to be wrong by most of us, but I thought that that might’ve kind of absorbed all the cash and kind of get people kind of fully invested back into the market, but honestly, I think that this pandemic has really, really frightened people, and I still see when we look at our data, a lot of cash sitting on the sidelines and when I talked to, you know, sort of professionals that I, you know, respect and read and things like that, I mean, I don’t’ know if there’s still a high degree of skepticism about what’s going to happen in the world really.

Tony:  38:12   Yeah. I’ve seen some research, which basically said that when COVID hit and we started to come out of it was the institutional investors selling down to the retail investors, and so there’s a lot of cash in the institutional funds too, but that would be a great tool or a great marketing tool for you if you had some kind of barometer of how much cash is sitting on the sidelines.

Doug:  38:32   I totally agree with you. In fact, I had that discussion, actually, it was so far marketers I have in my mind, just like a speedometer kind of thing. Like how invested are we? Well, what’s the sentiment basically.

Tony:  38:41   The weight of money.

Doug:  38:43   Exactly.

Tony:  38:43   That’s a really important thing if you’re an investor, if there’s lots of money on the sideline it’s kind of fly back into the market in the future.

Doug:  38:49   Exactly, and we like to think too, again, that we skew towards that kind of knowledgeable self-directed investor with a decent sized portfolio. So, you know, I think it’s meaningful if we see a lot of cash on the sidelines, which we do know that that might mean something to people who are looking for insights.

Doug:  39:04   Yeah, it does.

Cameron: 39:05   It also plays a role in the returns that people are getting. We had a guest whose name we shall not mention a few weeks ago on the show who was telling us about his recent investing success and his returns on his share investments were very, very good, but then he told us later on in the conversation that majority of his portfolio was sitting in cash. So, you know, getting a 70 or an 80 percent return on your share investments is great, but not if 90 percent of your investible capital is sitting in cash doing nothing.

Doug:  39:46   Yeah.

Cameron: 39:47  So people on one hand, they’re getting excited about BNPL and they’re enjoying the massive returns, but for the other hand, they’re leaving a big chunk of their capital in cash. That sort of indicates that, you know, they’re not really confident that the gravy train is going to keep going on. They’re not investing because they genuinely believe that this is a long-term healthy business whose shares are undervalued. It’s a FOMO investing strategy let’s hold on for as long as we can.

Doug:  40:17   Absolutely

.

Cameron: 40:17   But let’s keep a lot of our capital in cash because we believe it’s going to fall off the edge of a cliff at some point.

Doug:  40:24   That’s right and if you’re an experienced investor with a bit of gray hair, and you’ve been through a few of these things before, and you’re looking at some of the valuations of these tech companies, I mean, you know, sure maybe for a slice of satellite play, but going in all in on some of these things, I don’t think would stack up if you’re kind of using any kind of rigor in your investment decision making process.

Cameron: 40:45   We’ve tried, well, it’s been two years now. We’ve had growth investors and tech investors come on the show and Tony’s asked them, well, talk me through your valuation methodology for the stocks. How do you determine what it’s worth, what to pay for it? What price are you going to sell it at? Et cetera, and there’s a lot of gobbledygook about, well, we liked their customer service model and you know, it’s growing, you know, and there’s a big world, and 1 percent of 7 billion people is a lot of people and all the usual, you know, I’m a dot-commer from the late 90s. I mean, this stuff, you know, everyone was using the same slide deck back in the late 90s, 1 percent of 7 billion people is all we need to get. It’s a lot of this, it’s that’s a lot of that.

Tony:  41:36   Yea, and they’ve changed the terms. So, it’s addressable market now rather than eyeballs and it’s…

Cameron: 41:42   Oh, that sounds

Tony:  41:42   So all that software is a service rather than dot com.

Doug:  41:45   Yeah. That sounds much more grown up on Sharesight.

Cameron: 41:47   I wonder if getting a hundred percent return on a BNPL with 10 or 20 percent of your capital is as good as getting a 20 percent return on a hundred percent of your capital. You guys are much smarter than me. Anyone tell me what the maths looks like on that.

Doug:  42:07   Doing a weighted maths in my head is going to mean that I’ve been correct, but the thing that I think about there though, is what about a time and what amount of stress are you thinking about that a hundred percent return from that 10 percent allocation, right? Like, you know, people are busy and I don’t think people do a good enough job of valuing their own time. So, I mean, you got to kind of calibrate the impact on your lifestyle.

Tony:  42:34   Well, it’s certainly a good question, Cam, and it’s been debated and people like Talib who wrote the Black Swan, so, you know, adopt a strategy of having 95 percent in government bonds and 5 percent in the most riskiest asset they can find, and that’s the way he invests, but then you’ve gone on the other side of things like we heard in the recent weeks and in the past, and what buffet says is what Kelly says is you should put your investment where the highest return is, right?

So, if you are getting 50 percent returns a year or 36 percent returns a year, why don’t you have a hundred percent of the assets in that, because you know, you’re leaving a lot on the table if you don’t have it in, and that’s when you get into the psychology of it. Though, I don’t have all my money in there because I think I might go down in the future. Well then why you’re investing in it, if you think it’s going to go down in the future, you hoping to jump ship just before the skateboard goes over the cliff. Like, you know, it’s both mathematics and science and then there’s psychology and all this stuff.

Doug:  43:30   Of course, and boy are we reluctant to sell a loser stock, aren’t we? I mean, I’ve got a couple of my portfolio that are still in the red and I’m just like, ugh. You know, and look, I mean, rationally, the market’s done when the market’s done. I should actually right as we’re done here. I should log out and sell those things, right?

Tony:  43:47   Well, yeah, you should always. Yeah. Well, it depends on your tax situation too, they make good tax write-offs but I’ve heard someone recently saying that, I was speaking about somebody else, but I was still holding shares in Babcock and Brown, which was de-listed 10 years ago.

Doug:  44:03   Right.

Tony:  44:03   So they’re hoping someone will buy the shell and re-list. It’s like, come on, man.

Doug:  44:08   Wow.

Tony:  44:08   Just take that loss.

Cameron: 44:11   I’ve still got my Hot Copper shares from 20 years ago. They’re up on the wall in a frame. Well, that driving the car over the edge thing, the Thelma and Louise strategy is we’re going to go out, but it’s going to be in a blaze of glory, and maybe they jumped out before the car went over the edge.

Tony:  44:28   We never see what happened at the end of the film.

Woman: 44:34   Okay. Then listen, let’s not get caught. What are you talking about?

Woman 2: 44:38   Let’s keep going.

Woman: 44:40   What do you mean?

Woman 2: 44:41  Go.

Woman: 44:41  You sure?

Woman 2: 44:44   Yeah.

Cameron: 44:48  Well, I think you’re right. Yeah. I mean, you know, the approach that Tony teaches us on this show, Doug is one of, you know, we chase that 20 percent annualized return year in, year out, but it’s low risk, low stress, one hour a day, Tony would rather go play golf than worry about what his shares are doing. It doesn’t matter if he doesn’t look at his portfolio for a day or two or a week, you know, nothing majorly dramatic is usually going to happen except when a pandemic breaks out or something like that when he has enough warning that he should be paying more attention than he normally would, but it’s more of a lifestyle, a slow burn approach to investing rather than, you know, a Thelma and Louise strategy. Let’s put it that way.

Tony:  45:34   Well, it’s an approach which comes out of how it started as a full-time busy professional I didn’t have time.

Doug:  45:39   Yeah. I think that aligns really well with our user base as well. I’m sort of one of those people, myself, where I, you know, I’m busy two young kids, I’m a CEO of a tech business. I actually don’t check my own chairside portfolio very often. So, it’s kind of funny because I keep using my own account to sort of show off the product at various meetings and whatnot. I’m always having to go back and actually set it up again to find out what I’m actually doing as an investor.

Cameron: 46:07  Oh, you should pull it up and show us before you go. All right. Well, I think we’re all done, Doug. So, for our listeners who are using a spreadsheet and would like to give, Sharesight, starting to sound like Sean Connery, mesh money penny, share sight, Doug where should they start, Doug if they want to give Sharesight a go?

Doug:  46:34   So just go to sharesight.com and you can sign up for free. You can use the free plan for as long as you’d like to get comfortable with the software. If you are using a spreadsheet, you can upload that straight into the software. So, if it’s trades or if it’s a spreadsheet of say opening balances that you can get a hold of from some other system, just whack that in from say one July and Sharesight will pick up the rest from there. We also have broker integrations as well. So, you can actually bring in your trading history from most, if not all of the major online brokers, but yeah, we’re just, you know, punching a few shares manually just to kind of get a feel for how the system works. Yeah, like I said, it’s free. So, to give it a go.

Cameron: 47:15   Excellent. Well, I will be putting our portfolio up there because I’m sick to death of trying to keep it up to date in a spreadsheet and I completely screw it up, and then Tony has to come in and fix it. It’s complete nightmare.

Doug:  47:29   Yeah. You know, we’ve seen some doozies, we’ve seen some people trying to do DRPs in a spreadsheet and you get these waterfall things. It’s just a mess. Yeah.

Tony:  47:36   Yeah, you’re right.

Cameron: 47:39  Well, thanks a lot, Doug, for taking the time to talk us through that, and I’ll talk to you offline about the secret dark Sharesight.

Doug:  47:48   Yeah, please do. Thank you very much, Tony and Cameron, we really appreciate the time and we look forward to do more with you guys.

Cameron: 47:56  Good. Cool.

Tony:  47:56   That was great. Good luck.

Cameron: 47:57  Thanks Doug.

Doug:  47:58   Okay.

Cameron: 47:58  Cheers.

Doug:  47:58   Bye-bye.

Announcer: 48:01  Doug and his team at Sharesight have been generous enough to come up with a special plan for QAV subscribers. If you go to sharesight.com/qav, you’ll be able to sign up for their annual premium plan and save four months of the usual price. So, if you’re interested, check that out, sharesight.com/qav and as always, please don’t take anything you hear on this podcast as financial advice that’s right for you. We’re not financial advisors and we don’t understand your situation. So, before you make any decisions, please see your financial advisor or your accountant.

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