Regulation Overkill

This week, I am writing from London. I have been thinking about regulation. In theory, regulation is a good thing so far as it protects investors.

The problem is that most regulations add cost. Put regulated financial advisors to one side for a minute. Even just to buy shares in a company, you need to buy them from a regulated stockbroker who buys them on a regulated stock exchange. Sure, nothing is for free in this world but current costs make it prohibitive for the average investor. For example, the cheapest brokerage rate I can find to buy UK shares is GBP 6 per trade (most I have seen are GBP 10 plus stamp duty). If I wanted to buy 10 shares with GBP 1000, I am in for GBP 60. This is crazy.

The solution is not to invest in a pooled vehicle such as a mutual fund with a financial advisor. This solution can be just as bad and even worse when it comes to fees. The only mutual fund solution I really like is a low-cost index fund. And I mean really low-cost and not South African low-cost. You should only be paying a maximum 0.15% per year on an index fund (a % of assets, yes, but I can live with it at that rate).

Technology will give us the solution and “stick it” to regulation. Uber did it to the taxi industry and survived. I am just praying that this day comes sooner rather than later.

In the interim, there are a few lower cost alternatives around. EasyEquities have managed to lower costs to a degree in South Africa, Robinhood in the US and no doubt someone will do it in the UK soon (I am secretly hoping that someone already has and I just haven’t been able to find them 🙂 ).

What I have been reading

Shoe Dog by Phil Knight (current book I am reading)

Dividend News

  • RMI kept its dividend flat at 53c per share (SENS)