Superhero trading review from an experienced and long term investor. Can you trust this new ultra low cost broker with your share portfolio?
- Lowest brokerage for Australian shares at $5 per trade
- Minimum transaction size of only $100
- Built by same team as Afterpay and Z1P
- Very easy to use platform and Good app
- Not individually CHESS sponsored
- Have to pay for subscription to access to latest share price data
- Have to pay for subscription in order to use limit orders
- Share trading not instant – must wait till end of day to execute
Verdict: Superhero have slightly lower fees, but are not as secure as Pearler
Superhero trading review
Superhero trading is one of the newest Fintech’s to move into the Australian investing market, having launched in September 2020. Offering an industry leading $5 brokerage per trade and a minimum trade amount of only $100 (most conventional brokers have a minimum of $500) makes Superhero officially Australia’s cheapest Brokerage platform – on par with IG and OpenTrader’s lowest brokerage tier, but beating them overall because Superhero is a flat fee for any size trade.
“We are making investing accessible to the younger – there are a lot that feel locked out of the market, so they are going to the higher cost incumbents but they don’t really have to any more”john Winters, CEO Superhero
This article will explore what Superhero is, my experience chatting to their CEO John Winter, what their company can offer investors, and whether I think it is a suitable share trading and brokerage tool or not for those on the path to Financial Independence.
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Superhero trading review
Superhero claim to be democratizing investing, making it available to everyone without having to resort to micro-investing platforms which actually sneakily have pretty high ongoing fees (which seriously impact your investment return over time). Superhero is a fintech market disruptor, shaking up the Australian investing landscape and is a total game changer for those wanting to invest but feeling priced out of the market.
With over 300,000 retail investing accounts opened in Australia across all platforms in the first half of 2020 alone, it is clearly a booming industry – maybe it is FOMO (Fear Of Missing Out), ‘Corona Cash’ handouts, super withdrawals or perhaps it is just TINA (There Is No Alternative) with interest rates so low – but one thing is clear, lots of Aussies are wanting to invest, and Superhero is making it incredibly easy to do so.
Most of these retail investors previously had to make a choice; open a clunky account with a conventional banks investing division and pay eye watering brokerage fees, deal with long waiting times and red tape, and have minimum $500 investment portions (which make brokerage a ridiculous % of your trade), participate in micro-investing platforms (where the catch is high ongoing management expense ratios) or try and find a sweet spot with a Fintech somewhere in between.
Dubbed as ‘Australia’s answer to Robinhood’ (although Superhero’s CEO John Winters doesn’t really like this analogy), Superhero offers an industry leading low brokerage of $5 per trade and a minimum trade size of only $100, with an easy to use platform to make investing available to everyone – this is actually pretty much Superhero’s core motto. They work a little differently to most conventional share trading platforms; their use of automation and new financial technology, as well as modern corporate and financial structures allows them to operate with much lower costs and therefore pass the savings onto their customers.
Debuting Earlier this month in September 2020, Superhero has already had investors sign up in the tens of thousands, all keen to take advantage of Australia’s cheapest brokerage. Other brokerage platforms which are kind of similar to Superhero include trading platforms Robinhood, Stockspot and Stake.
“Superhero Markets and Superhero Nominees are both authorised representatives of Sanlam Private Wealth. Accordingly, Superhero acts on behalf of Sanlam Private Wealth.”Superhero – Financial Services Guide
Management and team behind Superhero asx trading
Superhero trading is a joint venture between who Buy Now Pay Later (BNPL) giants Zip (ASX:Z1P) and Afterpay (ASX:APT) that has been over two years in the making. Zip founder Larry Diamond and Afterpay founder Nick Molnar teamed up with finance expert John Winters and Wayne Baskin to raise over (AUD) $8 Million in funding to start the project, and appointed John Winters as the Chief Executive Officer.
One of Johns key motivations is wanting to modernize the investing industry and how we interact with technology to invest. With extensive experience in the finance, banking and investing industry over the past decade (including working for Macquarie bank as well as other private wealth management firms), he said ahead of Superheros 2020 launch that he “really struggled with how archaic the industry is – It’s built for the boomers, and they’re in their retirement phase.”
John saw during his time at Zip how fast paced the company was – they used technology to create and settle accounts in real time, avoiding significant delays experienced with conventional banking and credit industries. He knew this technology could be applied to other sectors, which began the brainchild that was Superhero.
What features do Superhero trading offer?
One of the main features that Superhero offers is the ability to trade ASX listed products for less than $500 per trade; the only other broker that offers this is Commsec pocket, and you can only buy from a choice of 7 ETFs with them, wheras Superhero offers you any ASX listed stock.
Superhero offer $5 trades for ASX listed stocks with a Basic account, but a limitation is that you can only purchase shares at market rate. This means when you submit your buy or sell order, you won’t know exactly what they will go for, and you will just receive the floating market rate at the time of settlement.
If you want to be able to set trades to execute at a certain price (and to be honest I am not sure why you would, especially if you know anything about the Financial Independence movement) you can upgrade to a premium membership called a ‘Superhero Live’ account which currently is $9 per month (charged annually with a one month free trial). In my opinion though, most buy and hold ‘investors’ won’t need this functionality, and this is more targeted at ‘traders’.
The ‘Superhero Live’ Account also gives you increased tax and reporting functionality, which for example includes tracking your tax obligations, portfolio returns, dividends and franking credits.
The Basic account also only allows you to follow the performance of up to 5 investments, whereas a Superhero Live account has no restrictions and you can follow as many investment ‘tickers’ as you like.
Superhero trading Brokerage and Fees
Superhero offer an industry leading $5 per trade on the Australian Securities Exchange with a minimum trade size of $100. So whats the catch? There doesn’t really seem to be a big one that I can find, but overall as a broker Superhero works a little differently to other companies – it is much more minimal and also has 20 minute delayed pricing data.
As mentioned prior, to get more trading functionality with Superhero such as live data and limit orders, you will need a ‘Superhero Live’ account which is $9 per month (billed annually). Given that similar products offered by other investing and financial services (such as NetWealth) can cost in the thousands per year, I think 9 bucks a month is a pretty decent rate!
There is a $1 fee to BPAY into your account (but PAY ID transfers are free), and to transfer stocks in and out of your Superhero custodian account, there is a fee of $55 per transfer. This is pretty high in my opinion, but is fairly standard for the industry. Of course, you will want to check out all of Superhero’s terms, conditions and fees on Superhero’s Product Disclosure statement.
Is Superhero trading CHESS sponsored?
Remember when I said Superhero do things a little differently? Well the answer to this one is complicated… They are CHESS sponsored, but its not in the way many other share trading platforms are. Let me explain…
I will start by saying that I always thought that CHESS Sponsorship would be a non negotiable must and one that I definitely look for in a broker. CHESS sponsorship generally means your shares are directly registered to you via an individual Holder Identification Number, and you retain legal ownership rights of the share, as well as receive corporate fraud and bankruptcy protection through this third party. This is often reasoned online in forums as necessary to prevent a drastic collapse and loss of shareholders investments (and money) like what happened with Opes Prime in 2008.
I will put up the disclaimer that I am not a finance professional, genius, or by any stretch of the imagination a finance expert. I spoke at length with CEO John Winters, who explained to me just how Superhero’s CHESS sponsorship arrangement works (and John may have had to explain this section to me a couple of times).
Superhero is not actually a ‘stock broker’ itself – they are technically a share trading platform. This is really just semantics, but the ASX reserve the right to use the terminology ‘stock broker’ to a specific set of ‘approved’ business partners. Superhero work with the wholesale stock broker OpenMarkets to provide share trading – OpenMarkets provide wholesale brokerage executions using API systems for many retail share trading providers such as SelfWealth, Pearler, Sixpark and Raiz.
What Superhero does differently to their competitors is that they collate the days trades and then execute (settle) each line of trade through OpenMarkets at the end of the day. This means they only pay a single wholesale brokerage execution fee for each ‘line of trades’ (individual share listings), rather than brokerage for every single transaction. In this way, Superhero works on a ‘High volume, low fee’ custodianship business model, and is able to pass the savings onto investors in the form of $5 trades. This just isn’t possible with many conventional share trading platforms.
What Superhero have also been able to do differently is to automate this process. There are some financial services companies such as NetWealth and Hub24 that use similar arrangements, but with high cost overheads from massive legacy corporate structures and hundreds of employees, these benefits just get absorbed by the company before they can be passed on to customers.
So is Superhero CHESS sponsored or not? Not in the way you might think. Superhero hold an Institutional Holder Identification Number (I-HIN) registered with the CHESS sponsored wholesale broker OpenMarkets. They however do not provide each investor with their own unique HIN (so your individual shares are not allocated to your HIN). Superhero hold your shares for you in their custodian account, where you are a beneficiary in terms with their financial licence.
If Superhero collapses, not having shares allocated to each unique personal HIN means the process of transferring your holdings across to another broker is slightly different to a conventional CHESS sponsored platform, and is a polarising point of contention for a lot of investors.
It is conjectured that custodian account share structures give these types of platforms the ability to use your shares for various commercial and profit making purposes (such as lending shares out to short sellers and delayed trading for behind the scenes ‘margin scalping’). When I spoke with CEO John Winters, he assured me that this could never happen to Investors using Superhero. John explained that;
“Superhero is a highly regulated entity and is licenced to provide custody and nominee services under its Australian Financial Services Licence (AFSL) issued by ASIC. We are required to hold regulatory capital and under no circumstances are we able to access clients funds or assets for our own use.”John Winter, CEO of Superhero.
John then further explained to me that under the terms of Superhero’s AFSL from the Australian Securities Investment Commission, they actually had increased regulatory compliance requirements as compared to share trading platforms who issue HINs through third party market participants. This includes reporting requirements, strict auditing and holding significant capital requirements.
When I asked what would happen if Superhero did collapse, John indicated that the shareholdings would default to their wholesale broker OpenMarkets, who themselves are required to hold over AUD $25 Million in regulatory capital. OpenMarkets actually offer a retail brokerage service called OpenTrader (which also offers $5 trades, but limited to $2500 trade size), so it is likely that your holdings could end up there – you would have the choice of receiving the cash value of your holdings or having them transferred to another broker. But as I said, I am not a financial expert and I am still delving into their Financial Services Guide and Product Disclosure Statement for the details, and would recommend you do the same.
So to summarise, in my opinion the low brokerage fees of Superhero (which are having a tendency to trend the whole Australian investing market in general toward $0 trades in the future) are a result of their custodian shareholding structure rather than a conventional CHESS sponsored HIN issue structure. You become the beneficiary of the share rather than its legal owner, and just have to trust that Superhero will act in your best interests in accordance with their AFSL and ASICs regulations. This is something you will have to personally weigh up and decide whether is important to you or not.
For those still worried about an ‘Opes Prime’ or ‘BBY’ type event, John provided me the following reassurance;
“For those still concerned about CHESS sponsorship, my answer is maybe you need to question why would you even want a HIN?
Selling Fear can be a very easy and profitable thing to do in finance, especially when its disguised as conservatism. This is why we see pushy insurance salespeople advocating high cost and sometimes unnecessary products, why bonds and fixed interest securities are promoted and so profitable for issuers, and why some companies are obsessed with promoting CHESS sponsorship as part of their marketing.
At Superhero we have incredibly tight financial regulations which we must adhere to, issued and regulated by ASIC and championed by the Financial Services Royal Commission. Superhero are incredibly aware and astute of our requirements and responsibilities, and have extensive experience including chair-members who actually acted against Opes Prime during legal and criminal proceedings.”John Winters, CEO of Superhero
How to sign up for Superhero trading
Getting an account with Superhero is pretty easy – just head over to their website and follow the bouncing ball. It is a straightforward application process to easily create your account, which can be funded instantly using PayID. Then you just choose the shares or ETFs that you want. You can create an account in as little as 5 minutes, as opposed to the days or weeks you might have to wait with conventional brokers
How to invest with Superhero trading
When you sign into your Superhero account, you will be presented with different themes – For examples Renewables, Health etc. This is super friendly for beginners and those who aren’t confident with investing, and can be a great way to learn how to get started. Personally though, I choose to invest in good quality, low management fee ETF and LICs in accordance with my personal financial Independence Investing Strategy, so I steer clear of owning direct shares or specific themes of shares myself.
Making a trade is very easy – you only need a Basic account to do so, and once you have funded your account (either BPAY or PayID transfer to your account details provided when you open the account) you can start browsing or individually select your stock, ETF or LICs ticker code. With a Basic account, you can only invest with market orders, which means you will pay whatever the floating market rate is for that stock at the time. Those with Superhero Live accounts can set up a limit order, which means they know exactly how much they will be buying (or selling) their particular stock for.
The trade then gets entered into Superhero’s system, which Superhero claim they will settle all trades at the conclusion of the business day. As a cusdodian ownership agreement, Superhero then holds the stock on your behalf under a special ‘Company Holder Identification Number (HIN)’ organised by the ASX, and it will appear in your Superhero account. As a beneficiary of the share under their custodianship, you receive all corporate rights and dividend payments from the share, as well as have the right to sell the share through Superhero if you ever so choose to.
Frequently asked questions about Superhero Trading
Answers to some of the most frequently asked questions about the Superhero Trading platform.
Is superhero trading safe?
When trading with superhero, your shares are held under an institutional HIN (IHIN) with CHESS. This makes them better than many managed funds, but not as safe as if held on your individual HIN as per standard CHESS sponsored brokers such as Pearler. You need to trust Superhero to manage your investments, which is the trade off for slightly cheaper brokerage. This means your assets are effectively mixed up with other investors on Superhero – something that historically has proven risky (Opes Prime and BBY are two recent examples).
Superhero ASX review
Superhero is a new fintech offering low cost $5 trading of ASX shares. To read the full review check out the CaptainFI superhero trading ASX review article.
What is better – Selfwealth vs Superhero
Selfwealth is a better broker than Superhero because it is CHESS sponsored and the trades execute immediately. Even better than both is Pearler, which has automated investing tools.
What are superhero fees
Superhero trading charge $5 brokerage on trades
Is Superhero CHESS sponsored?
No, Superhero is not CHESS sponsored in a conventional manner with individual investor holder identification numbers. Superhero holds an ‘Institutional Holder Identification Number’ on the registry, and manages all individual shareholder investments themselves in order to reduce costs. This means your assets are effectively mixed up with other investors on Superhero – something that historically has proven risky (Opes Prime and BBY are two recent examples).
What is the Superhero minimum trade
You must trade a minimum of $100 using superhero trading
Who owns superhero trading?
Superhero trading was venture capital funded and created by Afterpay founder Nick Molnar and cofounder Larry Diamond. This means Nick and Larry likely have large or controlling stakes, with non controlling stakes being sold to secure venture capital funding to start the company.
Summary of Superhero trading review
Superhero is Australia’s cheapest brokerage at only $5 per trade for Australian listed stocks (ASX) with a minimum trade size of only $100 rather than the conventional minimum $500 with other brokers. Superhero is very user friendly – it is easy to get started, make an account, PayID transfer in and get started trading that day. It makes it a very attractive option for new or young investors, especially if you have only just discovered about Financial Independence.
As a minimalist trading platform, Superhero doesn’t have a lot of the features that some other brokers tend to offer. Whilst it lacks conditional orders, detailed stock analysis and ratings, and you have to pay $9 per month for a Superhero Live account if you want to set limit orders, see live data and get basic accounting functionality, a Basic membership is a great no frills option for those of us on the path to Financial Independence who want Australia’s cheapest brokerage. We can’t control the market, but we certainly can control the fees we pay along the way!
I personally applaud their minimalist style, which helps cut all the bullshit out of investing since realistically no smart investor would ever get their investing information through a broker or share trading platform anyway. Informed long term investors will research their investments thoroughly and conduct due diligence ‘off-platform’ such as reading a prospectus, annual reports and statements from the companies that have been vetted by financial regulators (like ASIC). Honestly, all you really need from a trading platform is literally a way to buy the share with as low brokerage as possible, nothing else. So in my mind, Superhero ticks a lot of boxes here and is a perfect solution
The major decision point here is whether you are comfortable with their CHESS sponsorship and custodian shareholding arrangement. Remember, it is: Your money – Your move!
P.S. – you can use a free Sharesight account if you want accounting functionality without having to pay for a Superhero Live subscription!
P.P.S. – Stay tuned for future episodes of the Captain FI Financial Independence podcast, where John and I are set to hit the studio sometime over the next few months! I don’t want to give it away, but its going to be great.
Do you use Superhero or have you been researching it for shares trading? Let us know your experience in the comments below!
Competitors of SuperHero trading
So what about the competition? Superhero offers an industry leading price, but they aren’t CHESS sponsored which offers less security when compared to Superheros main two competitors in the Financial Independence investing space – SelfWealth and Pearler
Pearler, founded in 2018, fills the niche role of a share trading and stock brokerage platform for those on the path to Financial Independence with its $9.50 trades and automated FI investing features. Pearler’s crowning ‘Pearl’ in my mind, is its Autoinvest feature. This lets you automatically invest in shares (such as the ETFs and LICs we know and love) so you can put your investing on auto pilot and cruise toward Financial Independence stress free.
Because of my inability to maintain a disciplined manual investing strategy, I have switched to using Pearler to automate my share market investments.
SelfWealth is an Australian online discount broker which is CHESS sponsored. Being CHESS sponsored is a massive thing, which means you own the shares not them (unlike some other dodgy investment products out there).
SelfWealth has rock bottom prices with a flat $9.50 trades, which makes it one of the cheapest brokers around and provides what I think is industry leading service. It covers all the basics of what you need and even provides interest on its linked cash trading account which is run through ANZ bank. It is worth noting that most other brokers charge a percentage fee which means that you could be paying hundreds or even thousands in brokerage for bigger trades, as opposed to SelfWealth’s flat $9.50 trade. You can use SelfWealth to buy any share listed on the Australian Stock Market (ASX). This includes ETFs for other markets, meaning yes, its possible to own shares in every company in the world through one low cost investment vehicle purchased through SelfWealth.
If your interested about starting a SelfWealth account, or transferring your holdings to Self Wealth, Check out my comprehensive review here. If you want to start up an account and follow my guide on how to purchase shares. If you use the referral code in the article you will score yourself 5 free trades ($47.5 value):