Pearler’s Hayden Smith on investing for financial wellbeing

Pearler Co-founder Hayden Smith says starting small and prioritising simplicity and long-term market exposure are key to investing for financial security

In today's uncertain economic landscape, the significance of sound financial management and well-informed investment decisions has never been greater. However, the question remains: how many Australians are actively investing? 

In 2023, there has been a remarkable surge in on-exchange investors, reaching the highest levels since 2010, with over half (51 per cent) of Australians holding investments in addition to their home and super fund. While the share market attracts more new investors, particularly drawn to the simplicity and cost-effectiveness of exchange-traded funds (ETFs), more is needed to ensure equal access to investment opportunities, such as increasing participation from women.

Co-founded by CEO Nick Nicolaides, a former investment banker, CTO Hayden Smith, a software engineer, and Kurt Walkom, a former mechanical engineer, Pearler has swiftly emerged as one of Australia's leading investment platforms. With a core mission to alleviate financial stress and empower individuals with the necessary tools and knowledge to handle their finances effectively, Pearler has become a go-to platform for many Australians seeking long-term financial security.

From software engineer to Co-founder of Pearler

At the core of Pearler's offerings is a user-friendly app designed for everyday people, according to Co-founder Mr Smith, who was recently interviewed by UNSW Founder’s Director of Entrepreneurship David Burt. Pearler aims to enable users to instantly deposit funds and invest in secure, diversified options tailored for long-term growth, accommodating investments of any scale, from small contributions to larger sums, and making it accessible to a wide range of investors.

Mr Smith's path to co-founding and building Pearler traces back to his early years as a computer science undergraduate at UNSW Sydney, where he actively participated in engineering projects, such as constructing solar cars and programming robots. “I thought the idea of building stuff was pretty cool… I spent much time at university working on student projects, building solar cars, and programming robots. So the idea of just working together with small groups of people to do new things excited me,” he said.

While at university, Mr Smith gained diverse experiences working with various organisations. During his first year, he joined a small consultancy of five individuals. In his second year, he interned at Dolby Digital, and the following year, he worked at Microsoft, a tech giant known for its massive scale and impact on the industry. These experiences gave Mr Smith valuable insights into different work environments and shaped his journey toward becoming a successful entrepreneur. 

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“In these smaller organisations with clear focuses, there's so much more intent behind every action," he said. "I think large companies do amazing work but there's always that element of, you know, people don't always know why they're working on what they're working on, or they work on it, then it gets cut by two layers up. And that's no one's fault. It's just the nature of the beast of big companies and how you manage them.”

Dabbling in entrepreneurship, Mr Smith also launched a meal comparison service with his peers. Although the venture didn't achieve the desired outcome, it taught him valuable lessons, notably the importance of quickly getting products into customers' hands and engaging in conversations to gather feedback for improvement. While his experiences working in small and large organisations also led him to appreciate the clarity and intent in smaller, focused groups, ultimately motivating him to pursue a mission-oriented, entrepreneurial career path.

“I discovered that I was motivated by feeling like everything I did daily was the most important thing to do for that particular objective. I think start-ups aligned with that… like a real-world student project at uni, so to speak,” he said.

Then in 2017, motivated by sheer curiosity, Mr Smith became interested in investing. Through personal research and insights, he recognised that countless Australians were missing out on financial security due to a lack of guidance in investing. This realisation sparked the idea for Pearler, a platform with the mission of democratising investing, making it more accessible, and providing education on the subject. His primary goal was to empower individuals without financial literacy backgrounds to become confident investors through the services offered by Pearler.

Building community support and embracing responsible business practices

From its inception, Pearler received help from the UNSW Founders Program, which provided the founders with office space, mentoring, and valuable connections within the entrepreneurial community. “The UNSW founders programme was pivotal for us. UNSW founders provided us with the first offices we ever used and the first spaces to meet… but the main thing for us was, by far, the connections in the community,” explained Mr Smith. 

“Even to this day, one of the people we went through the accelerator with is one of our integration partners that we work with and kind of support each other. Meeting those people and sharing our ideas with them and having them critique and work together was by far the most exciting part of the whole thing,” he said.

Having built a strong foundation of community support, Pearler has always been committed to responsible business practices. “Pearler Investments is a company that's really focused on helping reduce the amount of financial stress in the world in particular, trying to provide people with the tools and education they need to get on top of their personal finances,” explained Mr Smith.

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“But more literally, what we're doing right now is we're a company that builds an app that helps people deposit money instantly and invest that money in kind of very boring investments designed for everyday people.”

Pearler leverages software to democratise investing to make it more accessible to its customers. They automate processes and utilise technologies like direct debited investments to simplify the investment experience. The company's engineering background allows them to identify areas where software can enhance and streamline investment processes and focus on a smooth and easy user experience.

“We probably try and use software to our advantage is largely automating processes. So, for instance, we were the first company out there that was making automatic direct debited investments into the stock market in Australia, what you might call chess-sponsored investing. 

“These technologies already existed: direct debits, you know, at your gym…the ability to place an order… we were just kind of combining those together. And our team has half engineers. So we spend a lot of time just saying, hey, there's a lot of things that aren't being done just because no one's done them. Let's write code to make that happen.” 

Smart investing: top mistakes to avoid for achieving financial wellbeing

Pearler aims to solve the key challenge of making investing more accessible to everyday Australians so that they can take charge of their finances and support their long-term security. For individuals who aspire to start investing but need help knowing where to begin, Pearler advises putting a small amount of money into an investment platform. This initial investment motivates people to get engaged and learn more about investing. Over time, confidence and knowledge can be built up gradually.

Some common mistakes new investors make, according to Mr Smith, include trying to build complex portfolios without proper diversification and waiting for the perfect time to invest. The company emphasises the importance of simplicity and long-term market exposure and advises against trying to outsmart the market instead of encouraging a balanced and diversified approach to investing.

“I'd say is the most common thing we see as people, for lack of a better phrase, are people trying to be too smart, which we all do from time to time when actually a simpler approach was probably fine all along,” he said.

Another common mistake is when people wait for the perfect moment to invest in the market, which can be tempting. Mr Smith spoke about his own experience on two occasions when he invested a substantial amount just before a minor crash in 2018 and during the tech bubble in the last year or two. However, he highlights that there is substantial evidence showing that being in the market for a longer duration is more crucial than attempting to time the market. It’s true that “time in” the market generally beats “timing” the market, he said.

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“It’s okay to buy a dip or to wait for a moment to have a little bit of money put aside, but you shouldn't have your entire nest egg just sitting there waiting for the stock market to go down by 50 per cent because you might die waiting, so to speak.”

 “The advice I usually give is that put a little bit of money somewhere because it kind of forces you to get engaged. If you can put $10 into a platform, like a micro-investing platform, it's going to you're going to be motivated to check it every day. I find that having just like a small stake in your own wealth in that way is the motivation that keeps people going and learning,” he said.

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