Democratising Investing | Fintech Re-defined – Charles Savage
Charles Savage is the CEO of the JSE listed Purple Group
A Fintech group democratising access to all things trading and investing. Savage has been actively involved in Fintech for more than 17 years, he was one of the pioneers of spread and CFD trading in South Africa in his role as CTO of GT247. com in 2000. He is the Founder and CEO of EasyEquities, a multi award winning Fintech platform, democratising access to share ownership everywhere. Tribe Business Magazine sat with Charles Savage as he took us through his incredible journey to success and how EasyEquities and EasyProperties are drastically changing the game.
Investment has always been seen as something for those who have and not for those who do not have, EasyEquities has drastically changed that. Can you please elaborate on how your products and services have successfully made this possible?
It has been six and a half years since the establishment of EasyEquities, even though it feels like an overnight success, I will never forget how it all started. I am extremely pleased with the way it has evolved into what it is today. The main reason why it’s so successful is, we sought to understand the friction points that retail investors were presented with explicitly; we tested our assumptions on real people. We even developed games to ensure that we had a good understanding of what was stopping people from buying shares. All the people we spoke to wanted to own shares, it didn’t matter who they were, what their academic background was, or what their economic ability was. They all agreed on one thing, they all wanted to own shares. Right from the start we decided if we were going to democratise owning shares, and if we were going to call this business EasyEquities, then we had to be sure we were going to eliminate all the difficult aspects of share ownership. To date, we have eliminated some key aspects that made it difficult to own shares, and we continuously find new discoveries and new friction points. There are two friction points that really unlocked incredible value, firstly everywhere we looked there where minimums, if you wanted to open a stock account or an investment account you had to have a certain amount of money. On top of that you had to pay so much in fees. Meaning if you couldn’t afford to buy the shares you loved, you had no choice but to buy other shares, shares you could afford. This didn’t feel like a business model that was going to work, so we went on to fractionalise shares. Fractionalising shares coupled with eliminating minimums was the fuel for our disruption. We have been successful because of staying true to our ethos, we constantly reflect on our friction points and prioritise understanding the challenges our customers face, because this is the only way we can carry on developing strategies to address their difficulties. Our goal at the end of the day is to empower, educate and reward our customers.
I discovered that with EasyEquities it is possible to buy property in Australia while I’m sitting in my lounge in Cape Town. Can you please explain how it is possible to achieve this?
Sometimes I take this stuff for granted because we have been doing it for six years, yet over the six years no one had ever done this. Fractionalising assets is such a powerful concept, it is powerful because there are a lot of people who don’t have large amounts of money, so for them getting access to this investment opportunity is really powerful. We all start our investment journey in things that we don’t understand and with a small amount of money, so it’s imperative for people to feel secure, and our structure allows clients to feel secure. Fractionalisation is no different from traditional ownership, in that if you wanted to own one share of a company listed in Australia, you have to have the capital of that one share, let’s just use $100 as the entry point, we take a $100 share and we divide it into 10 000 parts, so there are 10 000 fractions of that $100 share. This gives any shareholder of that 10 000 fraction all the benefits of capital ownership, from the price appreciation and depreciation to the dividend and much more. Your participation is a fraction of what the share is, for example if I own 10% of a share, in that $100 stock example, I buy $10, I will get 10% of that dividend declared for that share, I will generate 10% of the profits as it goes up. It’s simple maths that allows this fractional access to divide into far greater parts, and then we distribute those parts to our customers so that they can own whatever portion they can afford or are interested in. For example, there are lots of share holding companies that I don’t know much about, so I’m not willing to go and invest 100 dollars in them, but I am prepared to go and invest 10 dollars in them. Investing that $10 will give me access to their annual reports and Annual General Meetings. I will also receive a shareholder’s newsletter, this way I am an engaged shareholder, I can learn more about their company. As I learn more about it, my interest may grow, and I might buy more from that company. We think all shareholder relationships should start with small amounts of money, as people build their confidence and understanding, they can attach more of themselves to that company, in turn buying more because they will be able to afford more.
How do you decide which company your clients invest in?
In South Africa we work on all listed companies, we are a truly and proudly South African company. We want to empower all the companies that are listed on the JSE and radically drive democratising retail ownership. In other countries the approach is different because their landscapes are very different. For example, the United States of America has over 7 000 stocks – for every offshore stock that we own or put on our platform there is an intrinsic cost that comes with that. Data fees, corporate action fees and much more, if we add 15 000 at once we will have to make the service expensive for our customers. So, rather than doing that, we add the stocks our customers are most interested in. Typically, we start with Index stocks. We listen to our customers, when they request that we add shares – in the last three months we’ve added something like 120 shares in the USA. We have 350 000 active customers. For a share to be added there needs to be at least 100 customers that are asking for it.
How does someone request a share if it’s not on your platform?
There is a link on our website, which we promote. Attached to that link is a form and, on that form, customers request and make a submission. We rank all the submissions every month and the top ones are put on the platform, it is literally in the weight of those submissions. We don’t think the form is as good as it should be, in the sense that it doesn’t give any feedback to the user in terms of where their request ranks. So, what we are doing now is we’re building a voting system where you can get your share added to the list of shares that are up for voting, then customers can vote for the shares they want added. This will create more transparency, rather than something that goes as a file to our team and the team rules over the form but there is no feedback to clients.
Can you please elaborate on some key characteristics of fractional property investments?
In a nutshell it is all of the rewards of ownership without any of the hassle. I own property, I own my own home. I love property because it’s an asset class that you can touch, feel, visit, live in and so much more. However, the problem I have with buying and owning rental properties is that there is so much hassle with maintaining a property. EasyProperties addresses that, firstly you don’t have to own one, you can own a fraction of a hundred. I have all of the IPOs that we have done, we’re now on the sixth one. I intend to own a small piece of all of them, as a result I am going to end up owning a small piece of four to five hundred properties. Meaning I have diversified without any of the hassle. All I have to do is check on my dividend which comes from them every month and check on the evaluations. I’ll basically get all of the benefits of ownership without any hassle. I don’t like hassle, I don’t want to deal with rates and taxes. I love fractional property investment without any of the hassle – the key take away is you can start with R10. You can buy R10 of a property in the V&A Waterfront or R10 of an Australian property, and build your portfolio with whatever amount of money you have.
Who is your ideal client at EasyEquities?
The younger the better, 65% of our customers are under the age of 40, average age is 31 years old – 60% are male, 40% are female, 90% of them are black South Africans and are also first-time investors. We think that investing should start in your teenage years, we want our clients to be 50% male and 50% female in terms of demographic. We believe women should own the conversation as much as men. Five years ago, it was 85% male, 15% female so it has relatively shifted. We want to represent the fabric of the country that our customers come from.
Are there any plans to integrate and include other African countries to EasyEquities?
Definitely, we’ve been talking to Kenya for 18 months, we’re getting the right signals that we are close to signing a deal with a very large bank. This bank will give us access to other markets besides Kenya alone. Kenya is the Fintech King of Africa, they have created the best fintechs on the continent, we think we can go there and learn from them and hopefully replicate some of what they have done. Once we have gone past East Africa, we want to look at places like Morrocco, Egypt, Ethiopia and Nigeria. There are several dynamics that we will have to look into as we build and expand, because the platform will be the same but every country will have its own peculiar dynamics that we will need to understand, such as language barriers and cultural differences around money and investing. Just because we got it right in South Africa doesn’t mean we will get it right everywhere else.
Investing in anything is obviously risky to a certain degree, why should a potential property investor invest in EasyProperties?
We all worry about the risk of investing too much, and I’m referring to the entire system: regulators, asset managers, investors and everyone else. The risk we are not worrying about is what if we don’t invest? What’s the risk of not investing? The answer to that is the key and fundamental reason why you have to invest. The simple answer is we invest so that we can have a better future. It’s not a short-term game, there is no short-term reward, it doesn’t come without risk, there are no guarantees in any investment. The only guarantee is if we don’t invest in building the future, what will the future look like. It doesn’t matter how old you are, your income, your level of education, everyone wants a better future.
How do you select the different portfolios that you invest in?
We have an investment committee that sits twice a month. At that committee meeting, developers come and present their properties to us, and we pick the best ones and prioritise them based on what we think are the best property opportunities. We then list them on the platform. We pick the best ones and list those, right now it’s two listings a month, in order to get to those two, we review about 20 opportunities. Only 10% of the opportunities presented to us get listed, over time that will increase.
Once someone invests in EasyProperties, when do they start seeing return?
You get a return from two places, the first is you get rental yield, we rent those properties and sometimes when we purchase them, they are already rented. That rental income flows to you as rental dividend depending on the property. On the low end it’s about 4%, on the high end your rental can be as high as 8 to 10% depending on the property type. You also get a return when we exit the property, in five to six years’ time we will look into selling those properties to the shareholders and they would have captured growth on that capital. I think in South Africa we are going to see a resurgence in property over the next 10 years. There is also an opportunity to diversify. We’ve got 60 properties on the platform, 60 different tenants on 6 properties, so on average 10 tenants per property. We realise that whilst everybody has gotten into this with a longterm view, stuff happens in your life and you need access to money so we are going to allow quarterly auctions, where you will be able to put your shares up for sale, the auction option will only go live in a couple of months.
What is the future for your existing partnerships, for instance with Sanlam and Capitec?
You can’t democratise anything without partnership, it’s a shared responsibility, we’ve got incredible partners, Sanlam, Capitec, Bidvest Bank and Satrix has been key and strong partners. Our partnerships are all about having a shared vision of the future, and then delivering that vision along the partner rails. You can open an EasyEquities account with Capitec, through their banking app, its zero rated for data, and you get a 20% discount on your brokerage. We want to do more of those partnerships in South Africa, we would love to do a deal with a telco at some point. The key for our future growth is developing partnerships in other regions, and delivering those products and services down the rails because that will allow us to get some really powerful momentum around our growth. We don’t get everything right all the time, but we are getting a lot right than we are getting wrong. In understanding what we get wrong, we get better, we are open to engaging criticism. It feels good for someone to tap you on the back and say they love what you do, but you learn more from their criticism.
From a business perspective, Jeff Bezos and Steve Jobs were my two greatest inspirations. I learnt a lot by being a shareholder in their companies and watching them very closely. From a humanitarian perspective, Nelson Mandela. Female leaders inspire me and I believe female leaders are going to own a greater portion of the future. Leila Fourie at the JSE and Thuli Madonsela. My team and customers also really inspire me.
YOU CANNOT LIVE WITHOUT?
Without having a purpose to get out of bed, that purpose has to be far greater than making money for shareholders. I believe my purpose has to have a meaningful impact on the future of our country.
WHAT IS YOUR FAVORITE TECH GADGET?
My Garmin Fenix watch.
HOW DO YOU BALANCE BETWEEN WORK AND PLAY?
I’ve learnt that you have to create a culture that is accepting of failure, in entrepreneurship you need to know that you will fail more times than you will succeed. Big corporates don’t like failing but for me, the one thing that all success stories have in common is that at one point they all failed.
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