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SelfWealth Trading

Discussion in 'Brokers' started by CNHTractor, Jul 14, 2016.

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  1. wfdTamar

    wfdTamar

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    Post #11
     
  2. tech/a

    tech/a No Ordinary Duck

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    Makes sense
    That's a large box of peanuts
     
  3. Johny5

    Johny5

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    Hi Ginia,
    When you apply for a SelfWealth account you provide details of a nominated bank account that you want your SelfWealth withdrawals to be paid into. To withdraw funds its just a matter of nominating the withdrawal amount in the SelfWealth app, if you have the cleared funds the money will be transferred to your nominated account in a couple of days. To change the nominated account you must submit a certified "Change of Nominated Bank Account Details" form, so at least a level of security against hackers. Now to answer the question "And what would happen if self wealth were to go belly up?" well SelfWealth is not actually a broker so your funds are not covered by the ASX NGF "National Guarantee Fund". I talked to ANZ bank (who actually hold the funds) who do have some fraud/abuse protections on these type sub accounts, but I couldn't get any definitive answer from ANZ. So in short I don't think you have any solid guarantee that your funds are safe, if SelfWealth goes belly up you will probably be treated as just another unsecured creditor, but any shares that have been bought and paid for will be ok as they are Chess sponsored.

    But let me address a wider issue prompted by tech/a answer above. Brokerage charges aren't everything, quality of the platform, speed of execution are just two that come to mind, SelfWealth rates vey low on both of these. It all depends on how you trade, I day trade (mostly scalping) so I find Amscot's order bulking suits that style. So analyse the style of trading you want to use (find your edge) and go with the broker that best supports that style.
     
  4. wfdTamar

    wfdTamar

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    I've just asked Selfwealth support and here's what they said:

    'All client monies are held with ANZ that has very specific government issued provisioning requirements as issued by ASIC. Deposits are covered by the Government $250,000 Deposit Guarantee.'

    'There is a FAQ on our website'

    'The money is held in trust with Powerwrap and it is administered by ASIC.'
     
  5. wfdTamar

    wfdTamar

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    If you're looking for the Selfwealth PDS they have hidden it in the Terms & Conditions which can be downloaded at the very bottom of the site. The actual PDS starts about a quarter of the way into the T&C's.
     
  6. wfdTamar

    wfdTamar

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  7. Johny5

    Johny5

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    Thanks wfd for clarifying that, so I better reduce my deposit with them to $250k. When I talked to their support a few months ago they didn't give me that info, they didn't seem to understand how the finances were structured that's why I contacted ANZ directly (hey have they updated that confusing contradictory PDS?). I wonder how good the guarantees are nowadays, lost $330k 25 years ago when a broker went down the tube, ASX eventually paid up but it was a long stressful battle. So its best that a broker doesn't go down rather than trying to get your money back when they do, and unfortunately size is not a guarantee of survival, but it helps.
     
  8. wfdTamar

    wfdTamar

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    I'm just trawling through the PDS now. I'll post what I find later.

    I think the $250,000 limit is only relevant if the ANZ go broke. They use a lot of financial jargon that makes it hard to know what the deal is in the PDS. Also remember it's only the cash you have in the Selfwealth account we're talking about here, not the value of any shares you may hold at the time - they're in your name and safe.

    The problem is we don't know how successful Selfwealth is. I would have thought given how cheap the brokerage is it'd be very popular - and even if it's popular are they making enough money to stay afloat? They sure aren't making much out of me even though I trade a fair bit. I'm guessing Pershing get the lions share of the $9.50 per trade. That means Selfwealth rely on people paying for Premium membership. Possibly they make a bit of interest out of our money in the accounts (as the interest is measly of course).
     
  9. wfdTamar

    wfdTamar

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    From the PDS:

    'Responsible Entity' is Powerwrap.

    'Scheme' is The Powerwrap Managed Investment Scheme
    (this is where the PDS gets confusing as there is reference to this but it doesn't exist! I think they had plans for Selfwealth that didn't happen, but I gather it refers to Selfwealth).

    'SelfWealth Trading Account'
    A badged presentation of the Scheme, configured in conjunction with the Promoter, and designed to suit your investing needs.
    (not exactly plain English)

    Investors in the Product must open a single Cash Account (Cash Account).
    This Cash Account will be opened by the Responsible Entity and held on your behalf by the Scheme or Scheme custodian (beneficial ownership) to provide liquidity for the purchase of investments and the payment of fees and costs relating to your SelfWealth TRADING Account and to receive dividends as disclosed in this PDS.

    A Single Account
    The Powerwrap Investment Account (“Scheme”), from which the SelfWealth TRADING Account is issued, is a registered Managed Investment Scheme that provides access to a comprehensive range of investment options for you to use to construct a suitable portfolio of investments to meet your investment strategy and objectives.


    Maybe they had to couch the PDS in 'managed fund' terms to get the PDS approved and managed fund was the closest thing they could find to describe the social following concept of the Premium membership?


    Beneficial Ownership
    You will be the beneficial owner of all assets held within your Scheme Account. The assets will be held in the name of the Scheme. The Scheme may appoint a custodian for these assets.


    See? Not plain English. I have no idea what that means. What is a 'beneficial owner'?
     
  10. wfdTamar

    wfdTamar

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    Ok, here's what the Treasury defines beneficial & non-beneficial ownership (they talk about shares, but it could apply to an account). From here:

    https://www.treasury.gov.au/~/media/Treasury/Consultations and Reviews/Consultations/2017/Beneficial ownership of companies/Key Documents/PDF/CP_Increasing_Transparency_of_the_Beneficial_Ownership_of_Companies.ashx

    In Australia, shares may be held in two ways – beneficially and non-beneficially. If shares are beneficially held, the legal owner of the shares derives the benefits of ownership directly. They are both the legal and beneficial owner of the shares. An example of the benefits they receive could be dividend payments.

    Shares held by a person as trustee, nominee or on account of another person are non-beneficially held (that is, the registered member holds the share for the benefit of someone else). The person who receives the benefit is the beneficial owner rather than the legal owner.

    So that would imply we are not the legal owner of the accounts.
     
  11. Johny5

    Johny5

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    How successful is Selfwealth
    Hard to figure out as most of the information about them (reviews etc.) are from their early days or when they had just launched the $9.50 flat brokerage. The following is just an uneducated guess so take it all with a big grain of salt. Looking through the members portal they seem to have approximately 12,570 members. Lets assume that the average members trading portfolio is $100K (if your portfolio is smaller why be with SelfWealth, just use standard brokerage from other discount brokers) and probably on average 20% in cash (80% in shares). That means that SelfWealth would be holding an average of $251.4 million (12,750 members x $20K) in cash. They pay no interest to members for the first $10k, above $10k they only pay 1%. I would think that SelfWealth would have been able to broker a deal to receive at least 2.3% interest on the total members account balance. On the first $10k the interest paid to SelfWealth should be approximately $2.89 million pa, the next $10k should return approximately $1.63 million to SelfWealth, giving SelfWealth an income of $4.52 million. Now what if they do keep just $0.50 the brokerage on each trade, you guys can have a guess at how much that could add up to (Oh the $9.50 brokerage is paid in advance) all that's just a little bit of cream on top. Maybe there is some arbitrage between ChiX and ASX. I haven't counted any income from Premium Membership fees or other financial interests and investments they may be making profit from. SelfWealth seem to be a pretty small operation, I think less than 30 employees, for that size operation $4.52 million would be enough to satisfy the payroll, pay the rent and keep the lights on. The founder of SelfWealth is a banker so I think he would know his figures and be able to negotiate some pretty good deals with Pershing, ANZ etc.

    Well all the above could be absolute rubbish, wfdTamer and myself could be the only members the other 12,748 could be fake, how would I know.
     
  12. seventh

    seventh

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  13. Habakkuk

    Habakkuk

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    The 12,500 members are real, but many will be unfunded as can be seen when looking at the members' detail pages. It costs absolutely nothing to join and even if you never trade at all, your account is still part of the statistics.

    I've only joined recently (unfunded so far) and have spent some time looking at member portfolios. It's impossible to know any dollar amounts, only percentages. A guess is all we can come up with. Some members (a minority) have decent, balanced portfolios, making on average about the market return (more or less). They have little cash in their account, typically ~5%, probably a lot less than $20K.
    A vast number of portfolios consist of a single stock and cash (2 holdings). Most with some unlikely penny stock that I have never heard of. It's anyone's guess how much cash would be earning interest.
    Another large group have a small number of penny stocks and an ETF or two. Again, impossible to know how much cash.

    I get the impression that the majority of members are very unsophisticated based on their choice of stocks. They are unlikely to have a lot of cash languishing in their accounts.

    Your guess of an average of $20K seems wildly optimistic. Especially considering that many accounts have had no activity in several years, but are showing a perfectly smooth equity curve/line of a steady 1.5% return p/a, the fictitious interest rate they don't pay. It should be 1% or in fact 0% if the balance is below $10K.

    More guessing is required for brokerage income. I haven't made a trade yet but I believe they are executing through Chi-X only. It's a fraction of the cost of ASX, so they would have grabbed that. I could be wrong.

    Do you get the impression that many people are trading? They're mostly investors, I believe. The platform encourages them to rebalance frequently, no doubt, but would they do so?
    On balance, I don't think SelfWealth are making a fortune. 30 staff, I don't think so, more like half a dozen. Everything is outsourced.

    As a business it seems a very clever idea and for the average investor it's a pretty good deal, so why is this mob relatively unknown?
     
  14. Johny5

    Johny5

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    I think your right there, originally I was just looking over my thumb at the membership portfolio data, but when you dig into the profiles you can see that quite a few of them are pretty well idle or unfunded accounts. But there seems to be at least a few hundred of them that are quite active.

    An interesting point as I average $150k in the cash account and the interest paid doesn't really reflect that, so I'm sure that they use an algorithm that calculates the lowest possible amount of interest to be paid.

    Yes I may have been a bit an optimistic there, as I usually have more than five times that amount in cash, I thought why would anyone bother trading with less than $20k cash reserve, for example how could you take advantage of the wild ride the banks have had lately with so little cash (hey but I'm a day trader and love a wild blue chip ride)

    A few traders for sure but how many I don't know, would need to drill right into the other portfolios to figure it out and frankly I don't have the time at the moment. But one thing for sure the platform hasn't been designed with traders in mind, its possibly the worst platform for trading that I have ever used. Maybe that's on purpose as they may want to encourage investors and discourage day traders like myself (more profit in selling investor products)


    No I don't think they are making a fortune, I was more trying to figure out if they will survive (and not take our money with them if the go belly up). So 30 staff is more of a maximum but I think a bit more than half a dozen, probably an even dozen would do it (I'm including management). I'm thinking that you always need an edge in business and it always helps if you have something to hook the customers in, the $9.50 brokerage is probably just a big hook to build the customer base, then make the real money with the other products mentioned in the PDS.

    I have no idea why they are not better known, google them and the most you seem to get is info from when they launched the $9.50 deal or their own advertising. Maybe its because if you are a trader you would need to pay for third party data and charting because SelfWealth's is just not going to cut it. I actually hope they succeed and give the others a bit of curry.
     
  15. wfdTamar

    wfdTamar

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    You just need to open another broker account and have that open in another browser tab. Don't trade with it just use it for the data.

    I get the impression it's on the smaller side. There is only ever one of two people answering online chat (unless they all use the same name). They know me by name and they're always extremely helpful and quick to respond. Mind you they did make a few stuff ups initially - nothing too serious, but inconvenient.
     
  16. Johny5

    Johny5

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    Yes exactly what I do, but I'm just thinking that maybe a lot of traders would like it to be on the same platform so they can for example see their order in the depth queue and know exactly when their order is executed (or partly executed). Remember I'm a day trader so its nothing for me to buy a share and sell it a few minutes later, with the SelfWealth platform you don't even know your order has been executed till 10 minutes after the event, no problem to an investor but could be disaster to a day trader.
     
  17. wfdTamar

    wfdTamar

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    You sound like you're using it like me. Yes, you can only tell by watching the other brokers window, but I find it works fine. Maybe for lots of stocks it could get tricky, but that may be the case in any platform. I would prefer it to be in Selfwealth, but they wouldn't do a 'full' implementation cause it would confuse their target market I reckon. Could be an optional thing for those that want it. I might actually pay the Premium fee if they had that :)
     
  18. Habakkuk

    Habakkuk

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    Yes, I agree, 10 or so would be about right. Also looking at the building on GoogleMaps/Streetview. They may have Level 2 all to themselves, but that's another guess.

    As for security of the cash, it's all in separate ANZ accounts, although not exactly in your name and not under your control, so I don't know if it's possible for somebody with all the passwords to withdraw the lot und move to Rio de Janeiro.
    But it's better than Interactive Brokers where neither the shares nor you cash are in your name. What if all that money is needed one day to make America great again ...?

    While I've got your attention, could you tell me whether your trades (limit orders, presumably) show up in the depth queue on IRESS or whatever platform you use. I'm not sure if I understood what you mean by 10 minute delay for order execution. Do you mean it takes them 10 minutes to email you trade confirmations? If so, that's no deal-breaker - you can see if your order has been executed if it's gone from market depth. Or is it because it's Chi-X only and it's not shown? Why don't I check this out for myself rather than ask silly questions? Have to fund the account first.
     
  19. Johny5

    Johny5

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    Yes you can see the orders in IRESS (I often make the order an odd number so I can tell its mine). Once I find my order in the IRESS depth, I right click it and select "Highlight row" then if the order partly or fully trades an alert pops up. The SelfWealth phone app will popup an alert and you will also get an email confirmation about 10mins later, the desktop app/webpage will only update if you refresh the page (normally not a deal-breaker but for me it has cost in lost opportunities). A point to also note is that orders take a minute or two to appear in the depth, again only a problem to a high frequency trader like me.
     
    Habakkuk likes this.
  20. Johny5

    Johny5

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    I think we do have some similarities in trading i.e. we are both a little crazy ;-). I don't like to post my methodologies in fear of being flamed, but the bottom line is they work for me (as I'm sure yours work for you). I have been trading for more than 10 years now, full time only income for the past 8. I'm by no means making a fortune but I make a good living.
     
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