With 18 years as CMC Markets’ General Manager of NZ under his belt, we asked Chris Smith to share his insights on the world of investing, and what it’s like leading the local arm of a globally renowned fintech.
NZ Entrepreneur: In your role as GM of CMC Markets NZ, you have a good helicopter view of the economy. What’s the single biggest trend or challenge you’re seeing that stands to impact our audience of entrepreneurs over the next 12-18 months?
Chris Smith: Cost of capital is a game changer for sure, bringing with it, the ability to turn profits faster than previously planned. We know that in financial services for example, consumers want the lowest price possible (deflation) and expect this. Competition has forced margins to go lower and lower and the ability of firms to run at losses, hoping to raise new capital every year, could be going away.
On the other hand, for fintech businesses it has never been cheaper to access world class technology and pay next to zero fees enabling access to financial markets. I see subscriptions as the way of the future – if you look at areas like financial advice, accountants or mortgage brokers, consumers don’t want to pay much for these important services, so online solutions like robo-advisory will be prominent in the future. Whatever decision you make though, you have to do your research.
NZE: Most of the big tech stocks in the US are falling through the floor. Why is that and what if anything does that bode for NZ techs?
CS: Tech stocks are at the mercy of interest rates and inflation. If the US ten year bond is paying you 5% risk free per annum, then a tech firm that is not paying you any dividends needs to out perform this 5% by double or triple. Growth at any cost is no longer okay – tech firms need to both grow and make profits as the cost of capital to borrow is not near 0% anymore. Long term, the big stocks are still the place to be but many mid and small cap tech companies will have a tough time recovering from the pain of 2022.
NZE: Many business owners have business borrowings secured against their own homes or property – will interest rates continue to rise or soften in 2023? In either case what should business owners in this situation be considering as they plan ahead?
CS: I think we are very close to the end of rate rises – maybe even by April next year. We are on pause mode while the pain of rampant rate hikes in 2022 are still being felt in the economy. As much as I’m an optimist and the economy is stronger than we think, we need to be realistic and prepare ourselves.
NZE: CMC Markets was founded by Lord Peter Cruddas, who is often singled out as an iconic UK entrepreneur, given the fact he’s one of the wealthiest people in Britain. What’s he like to spend time with?
CS: Peter is super passionate about business, his staff and making an impact. I have known Peter for over a decade during my time running the NZ business. He’s proven that your upbringing doesn’t have to determine your success – because he came from very, very humble beginnings. What’s more, Peter’s work ethic 30+ years later is second to none, and he is still at the office every single day as CEO (if he isn’t travelling or at the House of Lords).
NZE: If Kiwi entrepreneurs could take a leaf out of Lord Cruddas’ book, what do you think that would be?
CS: Have a go, keep investing, make mistakes, and continue to try new things to grow your business through tough times and good times. Plenty have people have good ideas but executing them is where people shy away for fear of failure.
NZE: Elon Musk buying Twitter – good or bad, and why?
CS: I personally love Twitter, I use it daily and have just had to get used to the fake bot comments. If anyone can remove the bots and fake accounts I would bet on Elon. Twitter should have a subscription model and looks to be testing one, and it’d be worth every cent from my perspective as a financial markets investor.
NZE: And finally, what do you read or consume as news, to stay across what’s happening in the markets both here in New Zealand and internationally?
CS: Twitter is my number one source for financial news, as well as YouTube, CNBC and Bloomberg. I quickly scan 15 other business news websites every morning to stay on top of any local or international stories but very much stay in my lane.
