We are a nation of investors, say Superhero founders John Winters and Wayne Baskin, who consider that investing is “ingrained in Australian society”.
ASX research finds that 46 per cent of the total adult population hold investments outside their home and superannuation — and 23 per cent of retail investors who hold listed investments began investing in the past two years.
Their perception is at odds with what some may think about a young, inexperienced, yield-hungry retail investing cohort following the now notorious US GameStop saga where short-selling hedge funds were trumped by a coalition of small investors. The post-GameStop tremble in global markets left some commentators wondering whether the historic popularity of new online trading platforms like Robinhood Markets could produce similar price surges in “meme stocks”, which Bloomberg defines as “any investment being hyped on a social media site such as Reddit”.
Who is the real retail investor?
The founding duo are keen to debunk negative stereotypes about the new breed of retail investors given their unique vantage point. Unmatched growth propelled their share trading platform, Superhero, into the spotlight earlier than expected, attracting 10,000 customers within three weeks of launching and 70,000 customers to date. The majority of Superhero’s early adopters are typically older millennials. Baskin says a significant number are switching platforms to Superhero, choosing to transfer their portfolios. “We’ve got a very high rate of net buying on the platform. That tells us people are coming on, they’re buying and holding,” says CEO Winters, a former Macquarie Group banker. “They’re not just selling in and out. It’s not just day trading. It is people who are coming in and starting that wealth-creation journey. That’s really exciting to see people getting on board and using [the platform] how we intended it to be used.”
Winters says while speculation surrounding GameStop unwound quickly, there were more positive lasting effects. “Volumes in global markets spiked. Trading activity spiked. Awareness of the ability to create wealth through investing was put on the map for so many people who may have thought about it, but never really did anything about it.”
“It’s not just day trading. It is people who are starting that wealth-creation journey.” John Winters, CEO Superhero
Their detailed understanding of retail investors is why the founders don’t want to intervene on their platform and become a retail investing “Big Brother”. The pair consider a GameStop event unlikely in Australia, as does the regulator.
In March, ASIC cited factors like the Australian prohibition on “naked” short selling (illegal practice of short selling shares that have not been affirmatively determined to exist) and payment for order flow (the compensation/benefit a brokerage firm receives for directing orders to different parties for trade execution), as well as generally lower levels of shorting ASX stocks (15 per cent in contrast to the reported 140 per cent shorting that occurred with the GameStop frenzy).
However, ASIC did express its concern that first-time traders may be out of their depth and unaware of their risk exposure. “Everyone is entitled to take risks,” said ASIC executive director of markets Greg Yanco. “However, we advise first-time investors to focus on long-term goals and not make rash decisions based on a fear of missing out on market falls or gains.”
Regarding this concern, Baskin says Supherhero has checks and balances in place to raise red flags about an individual’s trading behaviour, which the company evaluates on an ad hoc basis. Another safeguard is that the founders refuse to consider any form of gamification with on-screen celebrations like animated “confetti” — even going so far as to avoid positive-reinforcement language on the platform.
“We’ve never wanted to gamify investing,” says Baskin. “We’ve never wanted to shout, ‘Hooray, you did this! or ‘Well done, good on you, come and invest more’. [That is to] ensure people understand they’re actually investing money, not playing a game.”
“I hope 90 per cent of people haven’t heard about Superhero [because] that’s the growth opportunity,” says Baskin, when asked where the next phase of the company’s growth will stem from. He says their 70,000 is “nothing, if you think about how many investors are out there”.
Price and user experience (UX) are the foundation of the founders’ customer-acquisition strategy. Superhero offer some of the lowest fees at $5 to buy and sell ASX-listed stocks, $0 to buy ETFs and $5 to sell ETFs. Winters says the platform has to work seamlessly and evolve with customer needs — sometimes within a fortnight of hearing feedback.
Owning that proprietary technology is not just the impetus to propel the company’s growth, it’s core to its operational leverage, say the founders. Baskin notes the company doesn’t rely on expensive and inefficient third-party providers for continuous improvement; rather, they do this in-house. Baskin’s background as deputy CEO of Booktopia emboldened him to say “Yes, we can build it,” when the pair were met with early scepticism.
That’s what friends are for
Superhero’s growth goals (including its expansion into superannuation) are consciously balanced with its compliance focus — the founding duo came up with the business idea for Superhero while the banking Royal Commission was in full swing, and have endeavoured to ensure consistent regulatory engagement so that nobody is “caught off guard”.
They are acting on advice of their chair — former ZipCo chair Philip Crutchfield QC — who the pair chose due to his experience acting for banks and ASIC. “And with backgrounds and understanding of some of the hurdles that the BNPL (buy now, pay later) spaces had, we do take a very conservative approach to how we look at new products, how we look at regulation, how customers are treated — the full picture,” says Winters.
Larry Diamond, Founder and CEO of ZipCo, and Nick Molnar, CEO/co-founder of Afterpay, are investors in Superhero.
“For total transparency, Larry [Diamond] is John’s best friend and Nick [Molnar] is my best friend,” says Baskin. “We didn’t say: ‘We need to target the fintech space for funds.’ But I’ve been through that journey with Nick and John’s been through it with Larry.”
The advice was clear: “Get your compliance and regulation right from the beginning”.
Superhero has just completed a $25m private capital raise and is eyeing the public markets within the next 18 months. The company’s APRA-regulated retail superannuation fund will be launched on its platform midyear.