What Is The Difference Between Investment Platforms?

But what we really want to do with this show is talk more about investing conversations and open up this platform even more to talk more specifically, because I feel like we've graduated a bit, like a lot of people are still in their budget and cash flow journeys, but a lot of graduated to the point where they're picking between different investment platforms, and there's lots of conversation and questions in our community at the moment, Jess about what

platforms should I consider, how do I review them? What's the difference between micro investing and like a share trading platform and robo advice, and for me, I obviously know what the difference is. I'm like, what do you mean? But you've had these questions before, We've gone through them, and it's just something we haven't covered in detail on the pod. So today we are going to be breaking down the differences and who they might best serve.

do I find one? What does that mean? And a lot of people are shocked when they come to find out how expensive financial advisors are, but then they think that maybe that's the only way you can access investing, and that's just not the case. There are so many options that put you in the driver's seat and in the best possible position to actually invest and have a positive impact on your future and feel empowered and get

education without actually having to see a financial advisor. Obviously, there are some circumstances like if you've inherited a lot of money or you're going through, you know, a significant change in your life where you're like, you know what,

I do need to see an advisor. I would always recommend that, but given the fact that to see a financial advisor it's probably going to cost you a minimum of three and a half thousand dollars in a statement of advice fee, that's quite prohubitive for so many people. So I think breaking down the different options that are out there for us is going to put us in the driver's seat, and I want to break them down

in I guess levels of complexity. So like, let's frame today in the context of primary school, high school, and university, except we'll call it entry level, mid level, and advanced kind of investing. Now, when I say advanced investing, I don't mean, oh my gosh, you have to be an absolute wizard like Warren Buffett and have millions of dollars. It's just the level of complexity. It's kind of like three steps. And I would love to maybe we'll make

a YouTube video on this. I would love to get in front of a whiteboard and show you guys the differences. But this is my way of framing that in an audio context. I love that.

is for. So let's start Jess with the primary school. Let's start with the entry level. Let's talk about micro investing. So obviously there are a couple of big ones in Australia that I talked about in our community, and I will shout them out by name. We're not going to break down the actual product. We will do another investing episode at some point breaking down the differences in specific product. But right now, this is your foundational level of understanding

of the different types of platforms that exist. The choice of what you use and what is going to work for you is actually on you, it's not on listening to a podcast. So let's talk about micro investing. Spaceship and Race the two names that come to mind when

we think of micro investing here in Australia. If you're in the Shees on the Money community already, you've probably seen people in our community talking about the two and the differences and what they do and how they work, because they are two very different products, but they both fall into the category of being micro investing platforms. So micro investing is when you deposit really small amounts of

money into an investment portfolio over time. Some people this is an absolute dream because it breaks down the barrier that used to exist, which was like, jess, if you'd like to start investing, you need fifteen thousand dollars or you need five thousand dollars or something that seems or feels really prohibitive, like it's just just such a high hurdle, like not many of us can actually say, look, I've got five grand in savings, like life is expensive and

do we get that, But it's from little things that big things do grow. It's been a while since I've been allowed to say that on the podcast. So basically, to start micro investing, it is relatively easy. You don't need to go see a financial advisor, you don't need,

you know, sign up for some complex platform. It can be as easy as downloading an app from one of your app stores, creating an account, and starting Most of them have the ability to connect your bank account straight there there's obviously going to be some level of identification that is required, so don't be terrified of that when they say, hey, Jess, can you upload a photo of your ID? And you go, oh my gosh, what for?

In Australia, they actually need to collect that information about you because we need to know who our client is, right, So this applies to financial advisors as well. And I actually think it's quite funny, Jess. If you came to me as a client, which surprise you have before. If you came to me as a client and we sat down, I actually need to verify your identity because it's in the counter Terrorism Act, right, Yeah, I need to make

sure that you're not laundering money. Yeah, so we need to make sure that you are who you say you are, regardless of how much money you're investing, whether that is one cent or it is a million dollars, Like, I still need to make sure as the person who's a advising you that you're doing the right thing. And a platform would have those same responsibilities as well. So they'm asking for your ID, isn't them asking too much? It's

actually a legal requirement. The other feature that people really seem to love about micro investing platforms is their ability to round up. So a lot of micro investing platforms offer the ability to round up. And if you haven't heard of this before, it's a fun concept where jess, if you say when and bought a note latte for three dollars fifty, what that would mean if you had roundups enabled on your account and you were connected to a micro investing platform is that they would round that

purchase up to the nearest dollar. So instead of that transaction costing three dollars fifty, it would cost four dollars and your micro investing platform would take fifty cents and

put it into your investing platform. For a lot of people, this is such a more accessible way to start investing, especially if you're a gen Z or a millennial, or you're really young and you're at UNI, or you know, you might just be strapped for cash, but you still want to feel like you're doing something for your future. This is a really good way of just rounding up those purchases. And the reason I kind of lean into it and go, do you know what, that's actually a

really smart way of finding some extra cash. There are a lot of savings accounts that have that capability too. The reason I like that is sometimes, Jes, you just don't have the wiggle room in your budget to allocate extra twenty or thirty bucks a month towards investing. But you can always connect your bank account that your discretionary spending is on, So if you're buying a coffee or something that is not your rent and not your bills, you actually have that capacity to invest or save or

do whatever you want. I think it's a cool feature across the board, regardless of platform. So for me that makes a lot of sense, and for you, if you're an investor using a micro investing platform, you might really like the fact that you're dollar cost averaging into the market.

So dolar cost averaging, if we haven't discussed it before, is where instead of dropping lump sums into the market over a longer period of time, you're consistently transacting in the market, so you're dropping money in on a regular basis, which means that you're always making use of the highs and the lows of the market. So on average, over time we end up paying the average, right, And that is good because Jess, if we could time the market, we would be so rich, like beyond rich. Look at

Warren Buffett, He's able to time the market. I don't know how. I think he's a wizard, or maybe he has something magic fairy duest in that house.

is not how we make decisions. The way we should be making decisions is by actually looking at the different products, their features and benefits and going this one suits me better, or this one suits me better. Right, So the difference between a managed fund and an ETF is is quite big in the grand scheme of things, but to you as a consumer, it's probably not. There are a couple of different products on the market when it comes to micro investing, and some of them have different portfolios that

you can choose from. So they will have like a conservative portfolio or an aggressive portfolio. They might have like a sustainable portfolio for you to choose from, and then those portfolios are made up of different ETFs that that micro investing platform has chosen that might work for you. So that is one way of investing. And an ETF is an exchange traded fund, which is basically where instead of buying individual shares, there is a portfolio that is

put together. It's like a big bucket, right, That's how I see ETFs. Like every time someone says ETF, I think bucket very sexy. But it's essentially a bucket that is run by an ETF manager and they put all of their different shares into a portfolio and they manage it, and then you purchase into that bucket instead of purchasing individual shares. On your own, and one of the benefits

of that is that you get instant diversification. So diversification is making sure that your assets are spread out instead of having all your eggs in one basket. And an ETF is quite a popular way of making sure that you have access to diversification, which is really important when

it comes to investing. You need to make sure that you do have good diversification because when we are investing law or amounts, we don't have the ability to be instantly diversified, right, especially when like if you look at like a bank's share, right that could be like anywhere between sixty and one hundred dollars per share to own. And then if you're creating your big portfolio, like how

do you get diversification across all the different sectors? Like you want to own some banks, maybe you want to own some commodities, you want some sustainable things in there, you might want some retail. There's not a lot of ways that you can make sure that happens with a limited budget when you're buying directly, So a lot of people like ETFs.

A managed fund then has an allocated fund manager, so that could be a person that is in charge of making sure that performs and they make decisions on all

of those shares in that portfolio. But instead of you going, I'm a conservative investor, I want to match this to my risk profile, you're picking a type of managed fund, and some of them in the market at the moment have maybe one or two or even three different types of managed funds you can choose from, but instead of aligning to your risk they actually align to maybe your values.

So it might be like up and coming companies, or it might be you know, the stock standard top two hundred companies, So it really depends on what you're looking for, and I think understanding those differences and how they work is really really important because you just want to know what you're getting, Like it's not just about reading the front of the cereal box. It's about reading the ingredients and how you're meant to mix it up and how

it works and who it's going to suit. So for me, it's really important that you understand that not all micro investing platforms are created equally. But one of the things that is really attractive to a lot of people in

the community is they're very low entry fees. So a lot of microinvesting platforms won't charge you until you get to a minimum amount, and that amount could be five thousand dollars invested, or they might have a very low monthly fee when compared to bigger investing platforms that would have the platform fee, but then you'd also be paying brokerage and maybe some advice like It completely depends, but accessibility on microinvesting platforms seems to be something that people adore.

for ten minutes. And I feel like that should really be taken into consideration when we talk about what your investing journey should look like, because a micro investing platform isn't the type of platform that a financial advisor would recommend to someone who's about to retire, and the reason for that is because you can't take the income that is being made in your investment portfolio as a income for you directly, it just automatically gets reinvested and your

portfolio is there and it grows and you would have to cash the entirety out to make money. So from my perspective, accessibility is really good. It's easy to get on these platforms. A lot of people in our community really like it because they feel like they're not, you know, putting their life savings into an investment. They can just start with like five or ten dollars so that they can see how the market starts to perform and how they feel when it's off and what that looks like,

and slowly start building from there. But what we do see in our community is a lot of people using micro investing platforms to springboard into like a shared trading account or robo advice or then seeing a financial advisor. So what I'm seeing is a lot of people using it. It's kind of like the start point. It's like primary school. As we said, let's talk about that.

to be very well aware of. And the thing is they're not harder to access than a micro investing platform. Right. All of these bar self wealth that I've mentioned, have apps that you can download that are super user friendly that you can just download from an app store, upload your information, and start trading, which is so exciting, right, and it means that investing is so much more accessible.

Something like self wealth load does have like an access point where you need a minimum of like five hundred dollars to invest, So obviously that's not as accessible, but if you compared that to like a SHARESI is you only need one cent to invest, and I just feel like that is such a new idea these days. Like historically entry level to direct share trading was so prohibitive because you'd need so much money, you'd have to pay a ridiculous amount of brokerage, and it would just feel

like it was so beyond what you could control. Now it's super easy. But the thing that I would want you to be aware of is that you need to have a knowledge of like, jess, what are you gonna buy once you've downloaded that a how do you know what you want to trade? So it's a bit more DIY and that you don't just go on the app, pick a portfolio and go yep, cool, this is what

I'm buying. You go on the platform and depending on what app you've downloaded, you could have access to Australian shares, US Shares, New Zealand shares, you could have access to some platforms have crypto and NFTs. Like there's so much diversification and range that you're going to need to have some level of education to make a decision that is right for you. And I don't want that to sound overwhelming,

because as we said before, ETFs are really popular. You can buy ETFs on share trading platforms, so it shouldn't be overwhelming. And sometimes just downloading an app and having a look through is a really good start of an education. Like you're not going to be bullied into investing five thousand dollars just by downloading the app and having a bit of a play with a small amount of money. But what I do want you guys to understand is it is a bit more of a responsibility on you

to be making those decisions. And you do need to understand what an ETF is or a managed fund, or what type of direct shares you do want to be purchasing for and why. And I think why is the biggest question we need to answer here is what's your intention? Are you buying it just because it's a bit of fun like your friends, you know, a couple of years

we're talking about after paties. Do you want to have a bit of a dabble in a few tech stocks or are you genuinely starting your journey towards creating financial freedom, in which case it is important to pick stocks that you buy and hold and go back to Warren Buffett's quote about holding it for ten years.

right for you. But the intention when buying shares should be a buy and hold strategy, like and that's not financial advice. That is just saying that we wouldn't want you to put yourself in a position where you had to sell something really quickly, Like I want you to be in the financial position where you don't have to sell something, because you shouldn't be investing your emergency fund right you should only be investing money that can be

allocated towards investing directly, and that's a question. We get a lot like, oh my gosh, well my emergency fund is doing nothing, And I'm like, that's the point of an emergency fund, Like it's meant to be super accessible. You're meant to know that that money is there rain, hail, or shine for you in the case of an emergency. It's not there to create wealth, Like, its job is to keep you safe. And I think we need to differentiate between the role that money has in our lives.

Some money is there to keep us safe. Its job isn't to make money. But then other money, like we're going to put that to work, and that's really important. And that's the type of money you'd put on an investing platform. So if you're in a position where you don't have an emergency fund yet, I definitely would be considering that before downloading an investing app, because in investing app, it should be for the long term. Regardless of what app you've picked.

not how it works. But it'll explain to you what the dividend yield might be and what that share is going to cost you to purchase, and it's going to explain to you what it's been doing over time, which I think is a really powerful thing and really important to tak into consideration when making this. As we said before, these apps exist to be a bit more DIY, like you're meant to be doing these things yourself, like that is your decision, whereas when compared to a microinvesting app,

like the decisions are made for you. You don't have to pick stocks, whereas on a shared trading platform you've got the power to pick your stocks. And I feel like I'm making this sound like it's a big responsibility, and it absolutely is, but it can be really empowering once you start looking into things and go, do you know what I'm going to download this app and I'm going to buy an ETF, probably going to buy two

or three eutfs that might align to my values. But then it gives you the access to be able to buy things that are in line with your values as well, which, as shees on the Money, we always want you to be buying things that are in line with your values.

of accessibility do you want? Are you looking for the ability to start at one cent or are you looking for the ability to invest your first few thousands of dollars? And obviously an option that has one cent is going to work for a few thousand dollars. But if you're in this situation where you're like me, I have my first five hundred, like and I want to maybe start with one hundred, You're going to want to look for

options that are aligning to your ability to access a platform. Right, So I would go on to their websites and just look for how much is it going to cost me? Am I able to access the things I want to access? Is the reporting that I want there? And am I happy with the values and goals of this company as well? So from my perspective, it's not just about going, can I access something good? It's about looking at the team and going, am I comfortable with the way they run

this business? Do I like this as a thing that I'm going to interact? Because when you're picking a shared trading platform, like the idea would be to buy and hold, but also stick with that platform for that period of time because it can get a little bit messy when you try and change platforms. So I'm making it sound dramatic that it's a really big decision, but it is and I need you guys to take it as seriously as I do.

It's because it's a little bit more expensive and a little bit more complex and comprehensive, and I think that that's important to understand. It's not because it's harder to access, it's not because it requires so much more knowledge on your behalf. It's actually because it's the one option that includes personalized investment advice. So it's basically just the same as going and seeing a financial advisor and just talking

to them about investments. So, as you guys know are here in Australia, financial advice can be really expensive and it's important for you to understand why that's the case.

So I'm a financial advisor and I give this advice and just before we even get into robo advice, so I think it's important to give you a little bit of insight as to why it costs so much, because if you go the like why does it cost you so much to go hey, invest in X, Y and Z, Like why is it between three and a half and seven thousand dollars for you to do that, but it's all about the relationship, right, So, like you would come in and sit with me as a financial advisor, and

I take into consideration absolutely every part of your personal life, your values, your goals, your tolerance to risk, what that means. Then we'd have another meeting. It might be another two hours or so on strategy. What you think you want to do? Do you want to buy property? These are the different options we have. Do you want to be investing in shares? What does the future look like. We've just got a lot of strategy to sort out, and then honestly, it takes hours for me to put together

a statement of advice. So a statement of advice is an official document, our one in our office I think usually sits between sixty five and eighty five Paige, depending on what type of advice I'm giving. You know, the more complex obviously, the more pages. But I don't want you guys thinking it's just it's like little one page that says heyes inversting exercise, because that's not how it works.

Like it's this really comprehensive document that compares and contrasts every option and shows you exactly why the option I'm putting on the table is the right option for you so that you feel empowered. Honestly, a lot of clients are just like V this is too much to read. Please tell me what the outcome is. I will look at that later and it makes sense. But these things honestly take hours. Then there's implementation, so I actually then

have to go and set it up. And accessibility of platforms that are available to financial advisors isn't available to you, Jess, so it does require different setups. And let's be honest, the financial advice industry is also a little bit backwards. It's why I can't use a Mac. Do you know that half of the financial advice software is don't work on Max? Really? So rude? Cool goal, Yess? Yes, cool girl. I'm not a cool girl. But I have to go

and implement all of those things. I also have to get paperwork signed and submitted and organized because like due diligence. But it's one of those things where I don't think people understand how long it takes. But do you know what robo advice has done, Jess, What's automated my job? So I'm not mad, I'm just a little envious that when it comes to robo advice. Obviously, you're not getting

that holistic advice. You're not going to go sit down with a financial advisor and talk about your goals and values and help sort those out, because you're going to have to know what your goals and your values are before you go. And they're not going to talk to you about insurance needs and they're not going to talk about superanuation because to be honest, those two things are way too complicated at the moment for me to even

comprehend an algorithm doing it. But if you were seeing a financial advisor just for investing, this is what robo advisors do. It's automating that entire process, so that fact find meeting and that risk profile that you do and the strategy it's all done in the background. And most robo advice platforms do that for fe free, like the statement of advice is free, and you only start paying once you start actually implementing that advice, which I think

is quite accessible in comparison. The thing that frustrates me about these comparisons, though, is so many times and you would have seen it in the community, Jess, people go, oh my gosh, robo advice so much more expensive the micro investing and you want to kind of go or I want to kind of go. No, Like it's completely different.

It's like comparing apples with oranges because you're just dumping your money into something on a micro investing platform, whereas with robo advice, you've got that full piece of advice, you get a statement of advice, but then on the back end there are actual people doing actual work to make sure your portfolio is doing the right thing, to make sure it is aligning to the performance that is expected.

They will rebalance your portfolio. So rebalancing a portfolio is incredibly important because over time, you will have different weights of different assets in your portfolio and you need to make sure they're even and aligne into your goals and values depending on what your risk profile is, and that

can actually be quite complex. But all of that is done for you with a robo investing platform, so you're able to access things like ETFs and a portfolio that is recommended by that statement of advice while having all of the back end support. So it can be kind of like the step up for people who are like I am not interested in DII share trading. Not for me.

Some people absolutely adore it. I totally get it. Robo advice is that step up which is kind of giving you advice but not being prohibitive on cost.

shees on the money six Parker. To go back to the question you are actually asking, Yes, it is definitely higher than a micro investing platform, which you can access for about three dollars fifty a month. Please do remember, though, that if you're paying for advice fees, so like robo advice fees or financial advice fees or even your micro investing like fees that you pay, it's all claimable and tax So definitely write that one down for JUNI three.

But I think it is kind of as a financial advisor a little bit frustrating when people compare a micro investing platform to a platform that you know does so much more and is actually a very different offering. And I mean, you guys go mass investing Victoria and I'm like, no, it's not. It's so different. And the important thing I would be taking into consideration there when it comes to

robo advice is the background information. So I really believe in automating processes that can be automated, right, Like, the less work I am doing day to day on the things that can be automated, the more time I have to spend all my clients and their goals and their values and maintaining those relationships and making sure that you are doing exactly what you said you were going to do, right.

And if the fact find process, which, to be honest, is a big survey that we go through and I collect all the information about you the risk profile, which, again, to be honest, I do do this big risk profile. But again I'm manually calculated. If all of that can be automated and we can create an algorithm that spits out advice, it's probably smarter than me. Like like, no room for human error, No room for human error there.

But when you flip to the back end. That's when I think it's really important to consider what that type of follow up looks like, like are you going to have access to people? Are you going to have a supportive community behind you if you're joining something like this.

And something else that's important to consider is do they actually have like some kind of investment committee or some kind of human overlay over the top of an algorithm, Because an algorithm is really smart, but you do need to still have that level of human interaction and human nouse that I don't believe in Algornith Rhythm has nailed on the head yet. So if you look at it, you go, all right, well an algorithm could solve it. And some robo advice platforms are one thousand percent algorithm.

There's no room for human intervention at all. And some other platforms actually have that automated process of the statement of advice and the implementation process. But once you're there and invested, they have an investment committee that oversees all of the investment in addition to making sure that they're

doing the right thing. So for me, it's about just working out what aligns to your values and really understanding and comparing and contrasting platforms to go, well, which one would I be the most comfortable on if I'm asking for advice?

five thousand dollars for a very comprehensive profile. So it definitely requires a bigger upfront investment. But it's also about well, what's going to suit your situation, Jess, Like what do you actually want to do and where are we actually going with this? And then I guess to compare and contrast that to a financial advisor, similar things happen as well, got it?

in general. Like, imagine if we can get to a point where everybody's sitting on some kind of robo advice platform and we know that the investing stuff is just ticking along really well, so I can focus on like goal setting with you, and I can focus on actually achieving things and changing your money mindset, which I think is so much more important.