The institutions would have ample opportunity to buy shares both on the listing and afterwards.
Prime Minister John Key announced on Sunday the Government would sweeten its SOE floats by making the minimum investment $1000 and providing a bonus scheme that would reward individual investors who kept their shares for a period likely to be around three years.
The bonus would not be available to institutional investors, including KiwiSaver schemes.
Mr Key also indicated that New Zealanders who applied for $2000 of shares or less would not be scaled back.
Mr Smith, a principal of the Kepler Group, said many of his clients were looking forward to buying some Mighty River Power shares, especially now they knew they could get at least $2000 worth.
It was likely that most of the SOE shares would end up in managed funds and KiwiSaver accounts, he said.
"It is my understanding that the number of shares bought by 'mum and dad' is only likely to be about one quarter of the total shares on offer.
"So what if, as the Opposition claims, that over the three-year period the total of all proposed sales adds up to $1 billion. It is $1 billion spread across all individual holders on what probably will turn out to be an astute investment."
The scheme for the partial sell-down of Mighty River, Genesis, Meridian and Solid Energy was designed to give every individual a chance to be involved, Mr Smith said.
Recent listings, such as Trade Me, were hijacked by institutions - particularly those in Australia - to such an extent that individuals either missed out or had to make a tough decision whether to buy or not at the resulting high prices.
Institute of Financial Advisers president Nigel Tate said the bonus system could encourage the public to buy shares without taking into account their whole financial situation.
He believed there needed to be more financial education.
"I just don't think the New Zealand public is ready to be buying shares. The assumption is that people understand what they are buying," he told The New Zealand Herald.
However, Mr Smith said he could understand the concern of Mr Tate in that there might be a "few people" who had never bought shares before and owned so few financial assets they might be overexposed to one asset class.
"Due to the loyalty bonus not kicking in for three years, it is a bit like KiwiSaver in that there is an incentive to stay the course. I can only see this being positive rather than a disadvantage especially, as has happened with many IPOs in the recent past, the share price falls below the list price not long after listing."
The institutions buying the shares would probably make sure the price did not fall simply by their demands to meet criteria in holding top companies of the NZX in their funds, he said.
Mr Smith doubted if many shareholders would sell as soon as the three-year qualifying period for bonus shares ended, as by then the shares were likely to be a core asset in a portfolio.
Investors were offered free advice from a selected group of sharebrokers and anyone with any doubt should seek professional financial advice, he said.
Tyndall Investment Management head of equities Rickey Ward said it was disappointing the bonus offer would not be open to institutional investors, including KiwiSaver schemes.
"We are managing the money on behalf of New Zealanders. Why shouldn't we be entitled to it as well?"
The bonus share scheme would potentially be difficult to administer because of large numbers of investors. He believed it would have been cleaner to cap foreign ownership in the floats.
The Government has still not costed the loyalty scheme it is going to offer for partial asset floats.
Finance Minister Bill English said yesterday the costs of the approach still had not been sorted out.
