Pearler is a low cost online broker that I’ve been testing out since early 2020.
It has been purpose-built for long term investing and they have some pretty cool features, which we’ll get to in a minute.
You might have heard of Pearler before. Or maybe you haven’t. Either way, I think you’ll enjoy this half-review, half-interview with Kurt Walkom, Pearler’s co-founder.
You’ll learn what Pearler is all about, how it works, who it’s for and why it’s changing the way people invest (in my view, for the better).
Before we start, a little background…
I met Kurt at the Playing with FIRE Documentary premiere (which Pearler organised). It was Kurt who encouraged and pushed me to be on the Q&A panel as part of the event.
(Interesting side note: some of you will remember that was a huge deal for me, due to being horrified at the thought of public speaking! So I’m thankful to Kurt for getting me out of my comfort zone.)
The day after the event we caught up for coffee and chatted all things life and FIRE…
I noticed that, like many of us, his enthusiasm for the FIRE movement is undeniable and infectious. What shone through from our chat (and subsequent chats!) is his genuine desire to get people talking about money and personal finance, where there would otherwise be stigma and silence.
Ever since then we’ve been in touch regularly and I’ve provided feedback on Kurt’s ideas and Pearler’s platform at each stage of development. Speaking of which, that’s enough intro – let’s dive into the interview!
So, what exactly is Pearler?
Kurt: Pearler is an online broker for long-term Aussie investors, founded by 3 friends from Sydney in 2018 after we got fed up with only having two bad options to refer our friends to when they wanted to start investing – confusing trading platforms or expensive micro-investment apps.
Just like other brokers, Pearler allows investors to invest directly into any Aussie stocks and ETFs (and soon US too). But where we differ is that instead of designing our platform around the buying and selling (‘trading’) experience, we’ve built Pearler from the ground up to focus on the thing that matters most – helping people achieve their long-term financial goals.
To do this we’ve got features like Goals and Autoinvest, which together allow you to set a goal (e.g. Financial Independence), then automate your investing strategy to achieve it and track your progress along the way.
We’ve also embedded community elements in our platform – we make it easy for our investors to compare and share their portfolios with friends, family and ‘Finfluencers’ (e.g. you mate 😉), or see what the most popular stocks and ETFs for a specific goal are, for example.
Our goal is to make it easy for every Aussie to invest in shares the right way – incremental amounts in diversified portfolios, for the long-term.
Where did the idea come from? How did you guys get started and why have you built Pearler?
Kurt: We have 3 co-founders: Nick, Hayden and myself. We’re all really passionate about helping people learn to become better with their money.
Nick and I come from a finance background – we used to work together at an investment office in Sydney. We realised that both of our social circles were experiencing similar problems when it came to learning to invest, despite being at different life stages (I was mid-20s and recently graduated Uni, Nick was early 30s and just started a family).
Long-story short, our friends were asking us to help them learn to invest and we had two options to choose from:
- Refer them to an online broker, give them a passive investing crash course and hope they don’t get confused or disillusioned along the way, or;
- Refer them to a micro-investment app, which makes it easy to invest in diversified portfolios for the long-term, but is more expensive and ‘dumbs down’ investing.
As you can see, both are bad options.
The learning curve for #1 is enormous and stressful, while #2 is more expensive and not how we invested ourselves.
We began to realise that there was this big gap in the market for a genuine long-term online broking platform – both for beginners and seasoned investors – and so we set about solving that.
This is where Hayden, our third co-founder, comes in. Hayden and I lived together in our first couple of years of university and he is the most talented software engineer I know. When Nick and I had this idea, we took it to him for advice on how the hell to go about getting it built.
Around this time I was also becoming more and more involved in the Aussie FI Community and saw that FIRE was doing an awesome job of helping people overcome the passive investing learning curve.
I then had the brainwave that Pearler should just start by building the perfect investment platform for FI and if we did that, we would be well on the way to having the ultimate long-term investing platform for all Aussies.
And that’s when I emailed you! 😂
What are your core values and purpose as a company?
Kurt: Pearler exists to help everyday people get better financial outcomes.
Most finance companies are set up to sell financial products they own to fit people’s needs. Someone comes in, asks for a loan, an investment, or insurance and they get sold something that the company owns, even when a different product is more suitable, most of the time.
This happens because finance companies are conflicted; they make most of their money from the products they sell, so the advice they give often puts the interests of the company ahead of the interests of the client. This is even true for financial planners – around 85% are bank-affiliated! 🤯
And the truth is that a lot of good financial products exist! The problem is that there is no “best” ETF, savings account or loan – they depend entirely on the goals and circumstances of the individual!
So at Pearler, we have decided that rather than try to make products, we want to help people find them – ‘The right financial products at the right time, starting with investing’, is our go-to line.
Ultimately, we want to be the company that democratises access to reliable financial advice and helps the 99% take back control of their financial lives.
Actually, all three of us have dug pretty deep into our individual motivations and have posted them on our site. These may be of interest? If so, you can check them out here:
In terms of our values, we haven’t yet formalised these, but here’s an exclusive look at the draft version for you mate 😉
- We build things people love to use, and we know when they do
- We give before we get, and give more than we get
- We make mistakes, but not with people’s money
- We are transparent, radically transparent
- We are passionate, economic and creative; we have an owners’ mentality
- We’re not on the hook to be here. We love what we’re doing, and who we work with.
- We’re for the 99%. We help those who struggle to help themselves.
People might think you’re just another low cost broker. What’s different about Pearler?
Kurt: One word: Long-term.
We’ve literally designed Pearler from the ground up for long-term investors.
Most low-cost brokers focus all their energy on making the trading experience better. Limit orders, market depths, weekly performance updates, the list goes on… none of this helps a long-term investor!
We’ve got rid of all this trading crap and replaced it with genuine long-term investing features like Autoinvest, Goals and Shareable Portfolios.
Rather than go through everything line by line, here’s a summary from our pricing page:
And in terms of pricing, our fees are very simple – $9.50 for transactions that are less than $17,500 and 0.055% for transactions that are more.
How do we know Pearler is safe to transact with? Is our money secure like with a big bank broker?
Kurt: Great questions Dave. We’ve put heaps of effort into getting risk and security right!
To make things easier, I’ll break this question up into three parts:
1– Are my shares safe with Pearler?
This first part is relatively easy. Pearler is a CHESS sponsored broker which means that our investors directly own their shares. It’s as simple as that. For those that don’t know what CHESS sponsored means, check out this detailed explanation.
2– Is my cash safe with Pearler?
In terms of cash, customer deposits are physically held in a Macquarie Bank Client Trust Account on behalf of our customers. The Client Trust Account contains an individual sub-account for each customer.
The Client Trust Account only holds customer deposits and is not co-mingled with Pearler business bank accounts. We’ve actually chosen to use a different bank altogether for Pearler’s operating expenses (like wages, rent etc).
The Client Trust Account is what allows us to set up a direct debit from your everyday bank account to your Pearler sub-account according to the investment rules and frequency you set.
The more popular alternative for online brokers – Cash Management Accounts – do not have the ability to direct debit from one account to another, but they do have some benefits like individual account numbers and direct ownership. For the full comparison between CTAs and CMAs, check out this detailed explanation.
At the end of the day, the account-type decision came down to automation or not – which made the choice very easy for us.
3– What security measures does Pearler have in place?
We’ve done a lot of work to ensure our platform is secure including:
- Using AWS infrastructure and security systems to ensure that our infrastructure is industry-standard
- Requiring two-factor authentication (2FA) to approve or modify all financial transactions.
- Ensuring users have appropriately complex passwords, which, when combined with 2FA is an industry best practice approach to preventing breaches
- Implementing phone call confirmation with any user who needs to change bank details to ensure the request is coming from the right person
- Separating duties across tech and financial actions including opening accounts, authorising direct debit requests, settling trades.
While Pearler is small right now, we have put in place security protections that are best practice in larger companies. We are also constantly learning more about this topic and refining our systems and protections on an ongoing basis.
This includes working with the next generation of cyber-security providers to design a risk management plan to grow with us. One of our early Beta-testers was actually an in-house security specialist for a Big 4 bank. After Hayden and I talked with him and implemented some of his recommendations, he’s now an investor on Pearler.
We’ve also consulted with cyber-security specialty agencies and are already planning for the next phase of investment and growth.
That’s the security summary! For those who’d like more detail, please check out this detailed post on security.
I love the Autoinvest feature and think it’s a complete game changer. Can you tell us how it works and how you’re able to offer this feature where other brokers don’t?
Kurt: Yeah, for sure! So Autoinvest direct debits from your linked bank account, then once that direct debit clears in your Pearler account we invest it in your target portfolio, according to the investment rule you’ve set.
At the moment we have 4 rules:
- Single share furthest below target weight
- Single share of my choice from my portfolio
- Rebalance to target weights
- Equally across target weights
And of these, ‘single share furthest below target weight’ is the most popular. This option invests in the share that is the furthest behind its target percentage at the end of each period and so is perfect for those who wish to optimise brokerage while still rebalancing their portfolio (e.g. almost everyone pursuing FI!).
This option makes it possible to set and forget completely with a target portfolio of ETFs (or stocks, or a mix). The only work you need to do is set up your target portfolio!
Here’s how Autoinvest looks on our platform:
As for your ‘why don’t others provide this?’ question – well, it’s a good one.
Big 4 brokers have the account infrastructure to implement this feature, so it’s definitely possible on their end. We think the key reason they haven’t is because they are concerned that if they were to promote passive investing strategies that would reduce brokerage income.
To implement ‘Autoinvest’ well, most brokers would need to build an entirely new platform and interface because investing behaviour is so different from trading behaviour – like CommSec have done with CommSec Pocket for example.
However, on Pocket there’s only 7 ETFs to choose from and it’s expensive for large investments. From where I’m sitting, it seems like CommSec doesn’t want their existing customers moving across to Pocket. Active investors make more trades than passive, after all…
In terms of other Aussie ‘startup’ brokers, it’s actually very difficult for them to provide the Autoinvest feature. The reason is that they use Cash Management Accounts for their client cash holdings, which aren’t direct debit friendly.
The easiest way to direct debit is to hold client funds in a trust or pooled account, like we do (further information). So yeah, it’s extremely hard for these brokers to implement Autoinvest with their current infrastructure & it’s also very hard to switch.
The reason why most startup brokers go with CMAs is they are much easier to get setup – you simply plug straight into a bank’s API. On the other hand, Client Trust Accounts require sub-ledgers and sub-accounts to be built, it’s extremely heavy-lifting. Unless you have ‘Autoinvest’ front-of-mind right from the beginning, CMAs are the obvious option.
Why have you decided to serve the FI community first and foremost? Especially since we’re typically long-term investors who don’t trade very much!
Kurt: The FI community is solving many of the problems that we and our friends faced. In particular, overcoming the enormous investing learning curve to getting started and teaching people how to invest the right way (incremental amounts in diversified portfolios, for the long-term) at scale.
And we’re aiming to make it easy for every Aussie to intelligently invest in shares and get millions more Aussies investing.
So since FI is already bringing thousands of Aussies into the sharemarket and teaching them how to invest intelligently right from the start, we think that if we can make it easier for FI to spread, we will be well on the way to achieving our aim.
For us, it’s all about the number of investors, not the number of trades. If we have one million investors each making one investment per month we’ll have one million investments per month running through our platform – and that’d make us a very successful company!
And one million investors might sound like a pipedream, but listen to this. In Australia there are over 400,000 18-24 year olds intending to buy ETFs in the next 12 months!
Pearler is without a shadow of a doubt the best place to invest in ETFs – so we just need to get our name out there and we think by focusing on serving the FI community we can do just that 🔥
What are your future plans/goals for the platform? Can you share any secrets about things to come?
Kurt: As long as you can keep the secret mate 😉
So there’s the features you might already expect that are on our roadmap, like:
- Multiple goals and multiple target portfolios
- Calculators to help set each goal
- Advanced automation
- US stocks and ETFs
- Single sign-in for multiple accounts
- Collaborative goals
- And much more…
The aim of these features is to continue to make Pearler a better long-term investing platform.
And this is where it gets really exciting. We think that as we build our long-term investing platform, we will be able to expand to include other financial assets – superannuation, loans and insurance, for example – and help guide decisions in these areas too.
Essentially, we think Pearler can become a personal finance marketplace – a one-stop shop for all financial products like investments, loans, insurance and a place you can find peer-reviewed high-quality financial services too, when you need them.
Our ultimate goal is to be the company that democratises access to reliable financial advice and helps the 99% take back control of their financial lives.
And now you know how we plan to do it! 🚀
Final words from Dave…
I’d like to thank Kurt for being such a good sport and letting me grill him with the important questions!
I hope you found this interview informative. It’s great to see there are people working on ways to make investing easier, simpler and more automated.
Update March 2021: Pearler now offer joint accounts and also the ability to debit small amounts and trigger an Autoinvest purchase when your balance reaches a chosen threshold ($1,000 for example).
I really like what Pearler is doing and the direction they’re heading. It’s funny when you think about it, they’re building a FI-focused platform with the very same mindset that we approach Financial Independence…
Question the standard approach. Optimise and improve on what’s important. Cut out things that have no real value. And help others along the way. Coincidence? 🙂
I’m excited by how this platform can improve the investing experience for a lot of Aussies, while removing all the noise and trading-focused features.
As mentioned, I’ve been using Pearler for a while now, including Autoinvest. I must say it’s very cool watching money go from your bank account to buy whichever ETF or LIC (or stock) you want automatically!
If you have any questions about the platform or its features, please leave a comment and Kurt will respond to you.
If you’d like to use a broker that’s focused on long term investing rather than trading, give Pearler a try. You can sign up using this link to get started and your first investment will be brokerage free.
Thanks for reading, and happy investing!
Note: Because I believe in what Pearler is doing (and I’m a happy user of the platform) I’ve decided to sign this blog up as an affiliate partner. This means if you choose to sign up using the link provided, this blog will earn a small referral fee.