CMC Markets is a trading platform that allows retail investors exposure to more sophisticated – and some would say more volatile – financial products.
Investors can trade currency, commodities, or even “short” stocks via CFD (contract for difference) products.
“I’ve got a higher risk tolerance than probably most people. But in saying that, I’ve had the same job for 21 years,” he jokes.
But for those who like a bit of investment risk, CMC Markets is a good place to be.
Smith has watched the British-based online trading platform expand in New Zealand as the levels of local investor sophistication have grown.
It isn’t the place for everyone, he concedes.
Many investors are content with paying down the mortgage and contributing to KiwiSaver.
“We are a niche, niche business,” Smith says. “We have strong suitability rules around who we onboard and our [CFD trading business] is a higher risk proposition.”
CMC does also offer a standard investing platform, more akin to the likes of Sharesies.
“When we first opened the office here, foreign exchange was our number one product. Most people we talked to wanted to buy and sell New Zealand dollar or the Australian dollar. Now it’s morphed to more, you know, global markets,” he says.
In fact, in the past six months, gold has become the most popular invested and traded product.
Oil trading has also picked up, with the outbreak of the Iran conflict this year.
“Most of our customers want volatility; they look for volatility in different asset classes,” he says.
“It’s a huge opportunity. It’s obviously super scary to some conservative investors. Yeah. Um, you know, if, if you’re used to investing in term deposits and you’re happy with, you know, 3 to 4% returns a year, this is not the place for you.
“But the S&P [500] has averaged 11% for the last 10 years. It’s far outpaced traditional cash investments.”
CMC doesn’t give investing advice, he says.
“It’s not something you would put your entire portfolio into, but a lot of our clients speculate on the markets; a lot of them hedge. There’s very few options to hedge yourself in this current market in New Zealand.
“If you believe the share market might have a downturn, you can benefit and speculate on that movement.”
Smith says his first exposure to stock market investing was when he was in his mid-teens.
“I was hooked from then on. My family weren’t huge investors. I certainly didn’t grow up listening to or hearing about investing.
“Investing was my way out … trying to do something for myself and grow my own wealth.”
He says he read every investing book he could get his hands on, such as Rich Dad Poor Dad and the writings of Warren Buffett.
“It was anything to get ahead, and property was out of reach. For the average young investor, you can’t go and buy a property. You know, you need that deposit, and investing was the way to create that deposit.”
Smith says he remembers being inspired by Graeme Hart taking over Aussie food giant Burns Philp in the late 1990s.
“It was one of the early stocks I bought, and then it was taken over shortly after,” he says.
“I got that bug of investing.”
In those days, just buying shares wasn’t easy – especially on international markets.
The Australian stock market was “super exciting” but very hard to get access to, he recalls.
You had to find a broker, and it was expensive to invest.
“I think it was a $500 minimum parcel of shares,” he says.
“Today we have fractional shares. You could buy $10 of shares.”
Fractional investing gives far more investors access to the markets.
“You could buy a portion of Tesla shares or a portion of the S&P 500.”
Smith also recalls that financial literacy, as something taught in schools, was very weak.
That’s something he hopes has improved but also an area where more could be done.
Later he had a share club at university.
“Six friends getting together, picking stocks, doing research, sharing ideas,” he recalls.
“All of that’s done online these days. But back then it was that enjoyment of finding the next Apple. We all knew that this was kind of an industry we would morph into working in.”
When it comes to investing, Smith says self-awareness is crucial.
“I think understanding yourself is the most important of all,” he says.
“How do you react if something happens, such as a 10% fall in something? The more you understand your own emotions and behaviour, it will help drive what suits your investing outlook.”
Smith says he’s worked with people in the finance industry who will only buy bonds or term deposit cash.
“For me, that’s total madness. But for them, it is what they’re comfortable with. Everyone’s different.”
He made mistakes, he says. But you learn.
“People are hard on themselves. Why did I buy that leaky property? Or why did I invest in that stock that was already up 100% and then it dropped? You often veer off track.”
That’s why financial advisers are still very important to the industry, he says.
“They keep investors on their path of goals, what they want to achieve.”
Setting goals is important, Smith says.
“Whether you’re wanting to buy your next property, or you want to go on holiday, or you want to retire at a certain age.
“You need something to work towards.”
Smith says he is a huge advocate for KiwiSaver.
“And I’m a huge advocate for making KiwiSaver more aligned with Australia,” he says.
“We have so many people moving to Australia.
“With their [savings rate] being 12% and wages being higher (despite there being enormous amounts of taxes in Australia versus New Zealand) … the more we can align KiwiSaver with the Australian level, the less we’ll be having a conversation about it [being] better there and worse here.”
So what is the best financial advice Smith has received?
“The best time to start investing is today,” he says. “If not yesterday.
“Do not wait for the crash in the markets, because you’ll be too scared to, like, invest then.
“I think there’s a stat: if you invested $10,000 over the last 20 years, but you missed the best 30 days, you would be down to $5000. So staying invested is the most important thing of all … throughout all market cycles.”
History does tend to repeat, Smith says.
He doesn’t let ugly geopolitical news worry him.
“There’s been conflict every year since I started this business,” he says.
“I can’t name a year there hasn’t been conflict to talk about, and the biggest days in the stock market are generally after the worst days; that’s why timing the market is quite challenging.”
Nor is he convinced by those who think we have an AI bubble to rival the 2000 tech wreck.
“I don’t worry too much about it. I think in terms of the AI companies, I think the genie’s out of the bottle. That’s not turning around.
“If you turn off ChatGPT or Claude or any of them tomorrow, there’d be a lot of uproar because it’s become part of many, many people’s daily life.
“I think that train’s left the station, and it’s going to gonna continue to gather momentum.”
We’re continuing to see enormous capex investment from the big “Mag Seven” companies.
Smith finds that comforting rather than concerning.
“They’re not silly, you know? They don’t decide to invest $100 billion plus without knowing that the future demand is gonna be there.”
For investors, these calls again come back to personal risk appetite, Smith says.
“It’s up to you how risky you want to make your investment strategy,” he says.
“If you put in no work, of course, it’s gonna be high risk. If you go and try and become a top golfer and put no effort in, it’s going to be pretty hard work for you. And it’s the same for investing.”
Some will argue that the safest way to invest is to do so passively, he acknowledges.
“They always say passive investing will beat active investing in most studies that have been done,” he says.
“Yep, but the challenge of beating the index is what drives myself, and what drives lots of our customers.
“The challenge that you could beat the market with your own DIY investing and research, I think that’s really exciting.”
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
Listen to the full episode for the complete conversation.
The Economy of Everything is available on the iHeart app or wherever you get your podcasts.
The series is hosted by Liam Dann, business editor-at-large and Tamsyn Parker, business editor for the NZ Herald. Thanks to CMC Markets.