The pandemic saw a huge number of investors buying equities for the first time. It’s no surprise that demand has also risen for smarter ways to track investment portfolios.
Doug Morris, CEO of Sharesight, talks to Jennifer Duke about the growth of Sharesight to include more than 400,000 users globally, and the insights this has provided into investor behaviour.
This is general information only. You should seek professional advice before making investment decisions. Sharesight is a supporter of Fear and Greed.
Find out more: https://fearandgreed.com.au
See omnystudio.com/listener for privacy information.
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Jennifer Duke: Welcome to the Fear and Greed Business Interview. I’m Jennifer
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Jennifer Duke: Duke. The last few years have seen a sharp increase
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Jennifer Duke: in the number of Australians investing in shares. It really
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Jennifer Duke: started during the pandemic when a lot more everyday investors
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Jennifer Duke: joined the market. It’s not surprising then that demand has
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Jennifer Duke: increased for ways to track your investment portfolio, to monitor
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Jennifer Duke: performance, track dividends, and make better decisions. One of our
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Jennifer Duke: supporters here at Fear and Greed is Sharesight, which has
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Jennifer Duke: been doing all of this for more than 15 years.
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Jennifer Duke: As a result, they’ve also got some terrific insights into
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Jennifer Duke: what investors are buying and selling. Remember, this is general
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Jennifer Duke: information only. You should always seek professional advice before making
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Jennifer Duke: investment decisions. Doug Morris is the CEO of Sharesight. Doug,
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Jennifer Duke: welcome to Fear and Greed.
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Doug Morris: Thanks for having me on, Jen. I appreciate it.
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Jennifer Duke: So I mentioned before this big influx of traders getting
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Jennifer Duke: into equities for the first time. What did the pandemic
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Jennifer Duke: mean for a business like Sharesight?
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Doug Morris: Well, very kind of rollercoastery I would say. I mean,
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Doug Morris: we were sort of wondering what it all meant when
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Doug Morris: the pandemic hit our shores down here in Australia. And
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Doug Morris: certainly we saw the market respond very negatively to where
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Doug Morris: it basically fell off a cliff in a matter of
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Doug Morris: a few weeks beginning in the US and then cascading
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Doug Morris: down here. But then all of a sudden what we
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Doug Morris: saw was something very unexpected, which was sort of the
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Doug Morris: trading volumes and the retail participation in the share market
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Doug Morris: just go through the roof. And as a result of that,
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Doug Morris: the entire digital space kind of came alive. So everything
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Doug Morris: from online brokers to research houses to applications like Sharesight,
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Doug Morris: all of a sudden this big international spotlight was shone
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Doug Morris: on what is, in the grand scheme of things, a smaller,
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Doug Morris: more niche industry.
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Jennifer Duke: It was a pretty amazing time. What do you think
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Jennifer Duke: it was about COVID that encouraged people to get more into investing?
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Doug Morris: I guess just boredom and a bit more cash in
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Doug Morris: your pocket. And it’s sort of like a lethal combination
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Doug Morris: of you’re locked inside, you’ve got the NBN and you’ve
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Doug Morris: got a few extra dollars from the government or from
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Doug Morris: the fact that we’re not going on holidays and spending
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Doug Morris: our money at restaurants. And I think it was really
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Doug Morris: that simple, to be honest with you.
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Jennifer Duke: It’s that European fund going into the stock market. Is that
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Jennifer Duke: what you’re saying?
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Doug Morris: Yeah, exactly. Exactly.
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Jennifer Duke: I mean, obviously the pandemic affected everyone similarly and differently
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Jennifer Duke: depending on where you were and what kind of lockdowns
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Jennifer Duke: you were in. But do you have any thoughts on
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Jennifer Duke: the sorts of people that started investing for the first
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Jennifer Duke: time and what they were buying?
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Doug Morris: Sure. Yeah. So what we saw at Sharesight was kind of a
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Doug Morris: continuation of the customer type we’ve always served, which is
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Doug Morris: sort of higher end, more experienced investors, and also I
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Doug Morris: would say diligent new investors looking to kind of do
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Doug Morris: the research and get into the market for quote, unquote,
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Doug Morris: “the right reasons.” But then what we saw in April
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Doug Morris: of 2020 was a surge in a new customer type,
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Doug Morris: and that was mostly younger people who were flocking to
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Doug Morris: tech stocks and crypto investments. And their sort of portfolio
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Doug Morris: sizes weren’t very large because they were new investors, but
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Doug Morris: they were trading a whole heck of a lot in
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Doug Morris: comparison to our more traditional customer types.
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Jennifer Duke: And obviously with that huge amount of activity, and I’m
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Jennifer Duke: assuming they’re using multiple trading platforms and crypto and it
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Jennifer Duke: can be pretty confusing, do they need somewhere to track
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Jennifer Duke: that overall position? Is that the kind of value that
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Jennifer Duke: you’re adding to that experience?
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Doug Morris: Yeah, indeed. So what we do is we provide a way for
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Doug Morris: customers to aggregate all of their information because most customers
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Doug Morris: use more than one online broker. And when you do
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Doug Morris: that, your record keeping gets really, really messy. So we’re
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Doug Morris: used to sort of a world that operates pretty seamlessly
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Doug Morris: on our iPhones these days, and that’s kind of not
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Doug Morris: the world of share market investing. It’s pretty ugly in
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Doug Morris: the backend, the plumbing, if you will. And so we
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Doug Morris: bring all that together and then we show people how
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Doug Morris: they’re actually going. So we provide performance reporting, some analytical
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Doug Morris: reporting, and then we do the tax reporting as well.
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Doug Morris: And so that’s our traditional use case and what we
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Doug Morris: focus on.
But what happened during COVID was we had
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Doug Morris: this influx of all these new investors into the market,
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Doug Morris: and actually most of these customers were using online brokers
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Doug Morris: for the first time. And so they tended to use
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Doug Morris: one broker. And so for us it was more of
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Doug Morris: an education effort, which is to say that, look, if
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Doug Morris: you’re trading on your phone, as most of these customers
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Doug Morris: were doing, you’re probably going to get very basic, if
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Doug Morris: anything in terms of performance. They’ll probably show you what
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Doug Morris: you purchased the investment for, they’ll show you what today’s
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Doug Morris: price is, and there’s just a basic calculation between today’s
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Doug Morris: price and what you purchased it for. And that’s definitely
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Doug Morris: not performance. You need to take into account how long
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Doug Morris: you’ve held the investment. You need to take into account
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Doug Morris: any dividends or what’s known as corporate actions, money flows
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Doug Morris: in and out of that investment.
And so really for
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Doug Morris: us, it became educating these people around, ” Hey, you really
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Doug Morris: need to stay on top of your performance tracking. Oh,
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Doug Morris: and also you’re going to have a tax liability most
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Doug Morris: likely come 30 June of the following year.” Because I
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Doug Morris: think a lot of the investors were unaware that buying
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Doug Morris: and selling creates both CGT implications and also potentially taxable
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Doug Morris: income implications on dividends and distributions as well.
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Jennifer Duke: Stay with me, Doug, we’ll be back in a minute.
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Jennifer Duke: I’m speaking to Doug Morris, CEO of Sharesight. Do you
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Jennifer Duke: tend to see a bit of a spike around that
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Jennifer Duke: tax time period of people signing up to Sharesight?
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Doug Morris: Yeah, we do. So June, July, August, all the way
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Doug Morris: up to the filing deadline in October is a very
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Doug Morris: busy season for us here in Australia. It’s interesting because
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Doug Morris: it doesn’t necessarily spur more investment decision making, although it
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Doug Morris: can right around that 30 June/ 1 July period if people
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Doug Morris: are looking to take advantage of any tax losses, for
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Doug Morris: example. But the nature of a subscription business like we
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Doug Morris: are is that you get those kind of patterns baked
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Doug Morris: into our business. And so every year we kind of
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Doug Morris: repeat that pattern through time.
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Jennifer Duke: And I think it’s sort of interesting because a lot
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Jennifer Duke: of people don’t tend to think about tax right up
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Jennifer Duke: until they start getting the alerts from the ATO. If
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Jennifer Duke: you sort of sign up later, does that include all
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Jennifer Duke: the data from across the years and how does that
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Jennifer Duke: work on the backend? Are you sort of collecting information
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Jennifer Duke: from all the main brokers here and around the world
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Jennifer Duke: and importing the data?
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Doug Morris: Yeah, so we support hundreds of brokers now. So what
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Doug Morris: that basically means is you can join Sharesight at any
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Doug Morris: time and you can go, in the case of the ASX, back to 1998 in terms
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Doug Morris: of the data we have. So if you have trades
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Doug Morris: sitting on a platform, say, CommSec or whomever from, say, the mid 2000s,
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Doug Morris: you can pull those into our software and then we’ll
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Doug Morris: track all your ongoing trades as well. And you can
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Doug Morris: do that with up to as many brokers as you’d like.
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Doug Morris: And we try to make our system pretty flexible. You
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Doug Morris: can sign up for free, give it a go, you
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Doug Morris: can add some trades, you can delete the portfolio, give
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Doug Morris: it another crack if you’d like. You can really kick
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Doug Morris: the tires to kind of see how it works. But yeah,
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Doug Morris: we sort of operate in, I guess, a time-shifted world
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Doug Morris: you might say, where you can go back in time
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Doug Morris: and recreate your portfolio. You can see how you performed,
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Doug Morris: you can see what your tax implications might have been
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Doug Morris: or you can start fresh from today as well.
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Jennifer Duke: There might be some people that don’t want to look
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Jennifer Duke: backwards at their performance for some of the recent periods.
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Doug Morris: That is true. It’s quite interesting actually, Jen. I mean
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Doug Morris: we’ve been around officially since 2008. We’ve been in Australia
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Doug Morris: for a bit shorter than that, 2011, 2012 or so. But
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Doug Morris: in that time, if you actually map the performance of
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Doug Morris: the ASX 200 or the S&P 500, I mean Sharesight’s essentially lived in a bull market for its
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Doug Morris: entire existence up until recently. And what we’re seeing really
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Doug Morris: is that people are sticking around because there’s more volatility,
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Doug Morris: there’s a lot more uncertainty than there ever has been,
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Doug Morris: at least in our lifetime as a business. And I
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Doug Morris: think we provide that assurance and provide that real-time look
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Doug Morris: as to how you’re going, which not only has implications
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Doug Morris: for whether or not you’re going to make any money
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Doug Morris: or not, but also for tax time as well.
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Jennifer Duke: That’s a really good point. We are entering this sort
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Jennifer Duke: of unusual period that a lot of investors won’t have
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Jennifer Duke: experienced before. Do you have any thoughts on what the
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Jennifer Duke: big investment trends might be over the next year or so?
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Doug Morris: I really don’t. I honestly feel, and this is my
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Doug Morris: own personal take, I feel quite uncertain as to what’s
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Doug Morris: about to happen around the corner. It just feels a
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Doug Morris: little too quiet out there. I mean, there’s been some
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Doug Morris: interesting analysis done around the fact that, yes, the market
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Doug Morris: is performing better and it’s sort of the usual suspects
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Doug Morris: that are driving that performance, the big tech companies in
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Doug Morris: the States. I think it’s like seven companies in the S&P
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Doug Morris: 500 are driving like 60 or 70% of the performance, which is the definition
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Doug Morris: of concentration risk, I suppose. So I don’t know. I
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Doug Morris: mean there’s a lot of enthusiasm at the moment about
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Doug Morris: AI and the chip makers supporting the AI boom, but
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Doug Morris: there’s still a lot of macroeconomic uncertainty. There’s a lot
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Doug Morris: of uncertainty still around what the heck’s going to happen
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Doug Morris: with interest rates, what’s going to happen with geopolitics, the
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Doug Morris: US election. And there’s this interesting analysis done around the
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Doug Morris: fact that, yeah, markets are doing better, but there’s real
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Doug Morris: tightening spreads in the day-to-day performance. And so the market
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Doug Morris: might go up or down, but the volatility has actually
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Doug Morris: kind of been taken out of the market. And a
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Doug Morris: lot of retail investors, mom and dad investors are sitting
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Doug Morris: on the sidelines and what they think is happening, they
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Doug Morris: being people who track this stuff, is that actually it’s
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Doug Morris: a lot of the large pension, superannuation and quantitative funds
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Doug Morris: out there whose algorithms are just kind of doing their
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Doug Morris: normal thing and rebalancing and so forth, kind of keeping
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Doug Morris: the market on a steady course. I wish I had
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Doug Morris: a crystal ball to answer that, but I really just
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Doug Morris: don’t know.
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Jennifer Duke: It’s fascinating, isn’t it? I mean, none of us would
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Jennifer Duke: be in full-time, I think, if we knew what the
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Jennifer Duke: market was going to do tomorrow.
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Doug Morris: That’s right. I will say, I mean we do publish top 20 trades by region and
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Doug Morris: by stock market, and we are seeing very, very, very
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Doug Morris: heavy buying. So we track buys versus sales, and we’re
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Doug Morris: seeing very, very, very heavy buying across some of the
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Doug Morris: bigger name ETFs in addition to those tech stocks that
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Doug Morris: I mentioned.
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Jennifer Duke: That’s very interesting. I did notice in the statistics, we
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Jennifer Duke: saw some info from Sharesight ahead of this chat, and
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Jennifer Duke: in those stats there was a lot of index investing
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Jennifer Duke: going on. And I was curious if that’s sort of
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Jennifer Duke: the financial independence retire early crowd creeping in a little more
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Jennifer Duke: or who might be kind of driving the indexing at
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Jennifer Duke: the moment?
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Doug Morris: Yeah, so ETFs are fascinating. Essentially, when I joined Sharesight
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Doug Morris: 10 years ago, ETFs were, I don’t know, 3%, 4%
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Doug Morris: of the trades by sheer volume on our system. So
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Doug Morris: the trades that we processed, we tracked. Now they’re about 20%
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Doug Morris: across the user base and we see two camps in
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Doug Morris: terms of use cases. We see, as you mentioned, that FIRE (Financial Independence Retire Early)
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Doug Morris: crowd or the newer investors, we see them using ETFs
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Doug Morris: as a way to get started in the market. That’s
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Doug Morris: something that I tell people to do like, look, if
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Doug Morris: you want to get started and you’re not sort of
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Doug Morris: intimately familiar with any kind of company or industry, consider
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Doug Morris: an ETF because it’s a great way to get going
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Doug Morris: and obviously it is a more diversified and, you might argue,
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Doug Morris: a safer approach. But where we’ve always seen ETFs used
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Doug Morris: amongst our more experienced base is in that core satellite approach.
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Doug Morris: And so people might build a portfolio that is comprised
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Doug Morris: of sort of half of the assets in ETFs in
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Doug Morris: sort of a bedrock style. And then the other half
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Doug Morris: of the portfolio is individual stock picks. And that’s something
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Doug Morris: that I do, for example, myself where I kind of
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Doug Morris: keep around half of my assets sort of autopilot ETF program,
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Doug Morris: and then I make individual investment selections above and beyond
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Doug Morris: that. And I got to say, something I’ve noticed is my
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Doug Morris: portfolio is rather tech heavy. I am the CEO of
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Doug Morris: a tech SaaS (Software as a Service) company. So I guess that comes with the territory,
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Doug Morris: got to eat my own cooking, so to speak. But
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Doug Morris: I did quite well. I outperformed certainly over the past
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Doug Morris: eight or 10 years, but my benchmark that I apply
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Doug Morris: in Sharesight is a diversified ETF from Vanguard. So it’s
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Doug Morris: essentially a balanced fund in the form of an ETF and
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Doug Morris: what I’ve seen, if you compare those two lines, my
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Doug Morris: portfolio is certainly outperforming for a long time and it’s
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Doug Morris: really receded back and it’s tracking right along that diversified ETF
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Doug Morris: in terms of a benchmark at the moment. So it
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Doug Morris: kind of goes to show you that sort of reversion
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Doug Morris: to the mean is well and truly aligned in the share locking business.
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Jennifer Duke: It’s a real thing. That is very true. Look, Doug, that’s all we have time
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Jennifer Duke: for, but thank you so much for speaking to Fear
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Jennifer Duke: and Greed.
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Doug Morris: Thanks so much, Jen. I enjoyed being here.
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Jennifer Duke: That was Doug Morris, CEO of Sharesight, a supporter of
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Jennifer Duke: Fear and Greed. This is the Fear and Greed Business
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Jennifer Duke: Interview. Remember, this is general information only and you should
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Jennifer Duke: seek professional advice before making investment decisions. Join us every
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Jennifer Duke: morning for the full episode of Fear and Greed, Australia’s
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Jennifer Duke: best business podcast. I’m Jennifer Duke, Economics Correspondent for Capital
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Jennifer Duke: Brief, filling in for Sean Aylmer. Enjoy your day.