Starting November 1 2021, the microinvesting platform Spaceship Voyager is increasing their fees to $2.50 per month for balances over $100. People have been going crazy about this, they’re not happy.
I thought the reaction was a little extreme and even though I’m not a Spaceship customer and don’t care – I thought there were a few interesting learnings to be shared from this recent news.
G’day there. Ray Corcoran here. In this week’s video, I’m going to be going over the news from the Australian Investing Service Spaceship. They’ve recently sent out an email to customers saying that they’re going to now have $2.50 fee per month. Previously they were fee free up until about $5,000 invested. I’m not a Spaceship customer, so I don’t really care, and even if you’re not a Spaceship customer, the response from people was very, very interesting from, I guess, a psychology perspective. Just seeing how angry people were getting about a fee that in my opinion was negligible.
So once the news came out, there was all sorts of people, the customers were tearing them a new one on social media. The people in the personal finance space that have a bit of a following, they were all doing all these videos about how to take your money out of Spaceship, and they’re not going to be customers anymore, and it was very, very dramatic. I was shocked with how dramatic the response was and how passionate people were about their response. And I kind of laughed about it because I was like, even on like the lowest, lowest income it’s $30 over 12 months. There’s no way you can slice that to make that sound expensive. Even if you’re working… My first job at McDonald’s at 14, like it’s still not much.
Now. I kind of mentioned that online on one of these posts and a few people piled onto me and they said, “Oh you’re an idiot,” and all that sort of stuff. And one lady did have a valid point. She had her son that was investing a little bit of money. He was 11 or something. And I think that’s fantastic that the kid is investing. I think that’s great on the parent, good job. However, the kid was investing… They don’t make much money obviously at that age. So he was putting in about $8 per month. Now $8 per month, she kind of argued that a $2 fee was going to be 25% roughly of the money that was being put in was going to go towards fees.
Now, realistically 99% of the customers, even the smaller customers, are not going to be putting in a hundred bucks a year. Even the people that don’t make that much money, they’re still putting in more than a $100 over 12 months, and it was a bit of a dramatic example because of course if you have $2 and you take away $1, you’ve just lost 50% of your money.It sounds very crazy at a headline, but they’re tiny numbers. And my response to that is fantastic that you’re getting your kids to invest, but people have to understand that these platforms have costs and I’m not defending Spaceship. I couldn’t care less in terms of what they do. I don’t have any skin in the game with them. But all these platforms have costs. All these platforms typically increase costs over time, and that’s just the cost of doing business.
And I guess that’s the first lesson, I guess, for people is there’s always going to be a cost of doing business. The reason you pay these services is because they can pick the investments or they manage the investments; in this case it’s a managed fund, but they’re doing a favour for you. They provide an app that has to be updated. There’s all this sort of stuff. And I’m sure they make plenty of money, but they need to make sure that they can scale and re-invest money into that product. And maybe because I’m a business owner, I kind of maybe empathise with that a bit because you have to have costs and you need to re-invest.
And even for the kid that is investing money that maybe young and a lot of parents are going to be putting money in there for their kids. Instead of winging, you could either a) just put in the 30 bucks at the start of the year and be done with it and stop being a tight arse, or b)… I’m going to get disliked for that by the way, or b) you could use that as a teaching point, because realistically if you complain about the fees and you try to get no fees, that’s not really an accurate representation of the real world for adult investing. If you’re investing in any platform as an adult, you got to pay fees. It’s always part of the deal. You pay the fee, but then they get you the return and the fee just comes off the return and away you go.
So you might as well teach them now in terms of how fees can erode your returns and just there is a cost of doing business. If you want to play at that table, there’s going to be a cost. And regardless of whichever way you slice it, I find it hard that you could say $30 over the course of a whole 12 months is going to be inaccessible to people. If that’s the case, maybe you shouldn’t be investing at that level. Realistically there’s… I actually did some research in terms of the minimum wage in Australia and I found a document that said that it’s about $20 for someone that is around 21. And obviously if you’re younger than that, that would be less. But we’re talking like 90 minutes of work for someone that is 21, at the start of the year that pays for someone to manage all the investments for the entire year up until a certain balances. So it’s one of those things. You just got to pay the fee in my opinion.
And the final thing that I wanted to say on it is, I guess this video was almost… I didn’t think it was almost worth making a video on but once I saw the reaction of other people, I decided to make a video, but the biggest thing is sweating the small stuff. For most people, if they did one hour, a couple of hours extra at work, even across the whole year, not even per week or per month, they would be able to tip more money in. For me, I try not to think too much. Obviously, you need to keep your expense ratio low; however, the amount that you tip in, especially early on, is actually really, really important.
And if you’re someone that’s just trying to fight the company on how much they’re charging for fees, I think personally, like just being blunt, I think you’re wasting your time. I would rather focus on all the time they spent arguing the posts and the complaining, one hour of work would have paid for that for almost everybody. And I think that you really should be focusing on how much can I tip into these accounts so they can keep growing rather than nickel and diming over a small fee.
So that’s all from me. Let me know what you think in the comments. Do you think I’m totally off the mark or do you agree, or what are your thoughts on this? Do you think it’s worth worrying about a $2.50 fee per month? Keen to hear your thoughts and yeah, I’ll see you on the video.