Meaghan Victor

State Street Global Advisors, Inc, the asset management business of State Street Corporation (NYSE: STT), has announced a strategic investment in Raiz Invest Limited (ASX: RZI), a leading Australian fintech platform that helps customers grow their wealth by helping them to save and invest. The parties have entered into an equity investment agreement (the “Initial Share Purchase”) as part of a strategic relationship pursuant to which State Street Global Advisors will acquire approximately 5 percent of Raiz’s share capital through a placement.

In addition, the strategic relationship will see State Street Global Advisors’ trusted brand and deep knowledge of markets come together with Raiz’s mobile-first platform, which helps Australian retail investors with micro-investments primarily in exchange-traded funds (ETF) and model portfolios. Leveraging State Street Global Advisors’ international library of resources, insights and trends, Raiz customers will have access to a broader array of financial literacy content and investment education tools.

“We are excited to expand our relationship with Raiz, a proven fintech leader in bringing important tools and educational resources to investors across the region. This strategic investment reinforces our strategy to join forces with wealth firms who share our commitment to help investors globally manage their investments and savings for retirement,” said Yie-Hsin Hung, President and CEO for State Street Global Advisors.

State Street Global Advisors’ SPDR^® S&P/ASX 200 Fund (ASX: STW) is currently the largest single fund holding in the model investment portfolios provided by Raiz to its customers. The asset manager’s SPDR^® MSCI Australia Select High Dividend Yield Fund (ASX: SYI) and SPDR^® S&P^® Global Dividend Fund (ASX: WDIV) are also available on Raiz.

State Street Global Advisors Head of Intermediary Asia Pacific, Meaghan Victor, said deepening the existing relationship with Raiz reinforces State Street Global Advisors’ commitment to the Australian market. “This investment is a natural extension of the successful relationship we have enjoyed with Raiz since launch in 2016. Both of us share a passion for making financial tools and solutions accessible to all investors, and through this strategic arrangement we will leverage our respective capabilities to help Australian investors plan and save for retirement.”

 Raiz Managing Director and CEO, Brendan Malone, said the strategic relationship would see Raiz and State Street Global Advisors work more closely together to create innovative savings and investment insights and education for customers. “From learning about investments in ETFs through to more complex investment strategies such as superannuation retirement portfolios, we look forward to continuing our relationship with State Street Global Advisors on educational tools for all stages of a customer lifecycle.

“Raiz’s Australian customers, who range from beginners to experienced investors, will benefit significantly from the global resources that we can provide through this strategic arrangement. Between Raiz’s technology and State Street Global Advisors’ global investment capabilities and markets expertise, there are great opportunities for innovation in the Raiz product offering.” 

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George Lucas

Raiz Invest Limited (‘Raiz’ or ‘the Company’) (ASX: RZI), a multi-award-winning micro-investing and fintech platform with operations in Australia and Southeast Asia, is pleased to provide an overview of its financial results for the fiscal year ended 30 June 2022 (FY22). This overview should be read in conjunction with the financial report for the year ended 30 June 2022.

Financial and investment highlights

All comparisons are for Year on Year (YoY) movements as at 30 June 2022.

• Total revenue for the Raiz Group up 39.5% YOY to $18.7 million
• Consolidated loss of $5,902,000 (FY21: $258,000) attributed to shareholders after adding back the cost of the employee share option and amortisation & depreciation expenses
• Normalised consolidated loss of $3,927,000 (FY21: $258,000) attributed to shareholders after adding back the cost of the employee share option, amortisation & depreciation, and contra advertising non-cash expense
• The Raiz Micro Investing Platform revenue up 52.2% YOY to $17.4 million
• Raiz’s Annual Recurring Revenue (run rate) up 21.5% YOY to $14.7 million
• Revenue per Customer (run rate, Australia) was up by 8.2% YOY to $55.90
• Global Active Customers up 42.8% YOY to 652,702
• Australian Active Customer up 6.1% YOY to 289,500
• Indonesian Active customers up 114.9% YOY to 253,420
• Malaysian Active customers up 66.3% YOY to 109,782
• Global Cost of Acquisition per customer was $13.1 for the year
• Global Funds under Management (FUM) up 18.1% YOY to $954.4 million
• Superannuation FUM up 74.6% YOY to $186.1 million (including Superestate acquisition)

Operational highlights

• Completed the acquisition of Superestate, boosting FUM and providing Raiz with the capability to offer residential property as an asset class inside and outside of superannuation.
• Invested $2.15m in the Malaysian operation alongside joint venture partner Permodalan Nasional Berhad. Raiz retains 70% of JV.
• Diversified media group Seven West Media (ASX:SWM) made a strategic investment in Raiz with a 6.6% stake for $10m, which was made up of $8m in advertising credits and $2m in cash.
• Raiz Rewards platform updated in Australia to offer more in-store rewards. Raiz Rewards is being rolled out in Indonesia and Malaysia.
• Raiz Kids product relaunched after a period of beta testing with select customers. Raiz Kids is being rolled out to Indonesia and Malaysia.
• Raiz won the Excellence in Wealth Management (including Personal Financial Management and Robo) Award at the FinTech Australia Awards.
• Australia Micro Investing Platform Gross Profit margin was 64%.
• Overall Group operating cash utilised was $2.8 million, with the Australian business remaining operating cashflow positive for the full year.
• Employee benefits expense increased 50% YoY with most of the increase due to a combination of new Superestate staff acquired, new hires, internal promotions and short-term bonuses paid in respect of the FY21 year.
• As of 30 June 2022, Raiz had cash, cash equivalents, and term deposits totalling $15.7m.

Strategy

Raiz has performed strongly in the FY2022 despite volatile markets, especially in the final quarter, as the pandemic, geopolitical tensions, rising interest rates and inflationary pressures took their toll on investor sentiment. All these factors were evident in the three regions where Raiz operates, Australia, Indonesia, and Malaysia, yet all three showed significant gains.

These challenging market conditions persist today, accordingly, and consistent with continual consideration of Raiz’s strategy, the Raiz board, has begun a formal process of reviewing the Company’s strategy. At the AGM the board expects to be able to present an updated company strategy to the market.

We continue to be a market leader, and this was illustrated in June at the FinTech Australia Awards that saw Raiz walk away with the Excellence in Wealth Management (including Personal Financial Management and Robo) Award. Raiz continues to be recognised for providing innovative, cost-effective and high-quality Investment and Wealth/Asset Management solutions.

Joint Group CEOs George Lucas and Brendan Malone said: “FY2022 saw Raiz encounter some challenging trading conditions. Despite these challenges and weaker investor sentiment, the business continued to grow in Australia and Southeast Asia as the Active Customer and FUM numbers attest.

“What it shows is that our strategy of customer first allows us to retain and attract new customers to Raiz even during challenging times. In Australia, we were particularly pleased by the increase in Superannuation FUM. Although this included the Superestate acquisition, we are encouraged that more Australians are entrusting us with their retirement savings.

“We are also proud of the Cost of Acquisition (CAC) we saw throughout the FY22. But in recent months we have not seen revenues increase as strongly as we have seen in the past. To combat this, we continue to closely monitor our expense base and make the appropriate decisions for the business.

“We need to thank the Raiz team globally for their commitment to the Company. They ensure we deliver the products and customer experiences that provides our customers with the best possible experience.

“Finally, to our shareholders, it has been a difficult year, especially the second half, so thank you for your ongoing support in our journey. We are committed to review the long-term strategy for Australia and Southeast Asia to ensure the company is focused on delivering value to its shareholders and stakeholders in the long term.”

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Alex Gao is an experienced financial executive. He has more than 15 years’ experience in accounting, finance and operations. As CFO, Alex will oversee the financial planning and board reporting, management accounting and other accounting functions.  He will also have oversight over Raiz’s  pre and post compliance of all trading functions.

Alex is a member of CPA Australia and holds a Master of Commerce from the University of Sydney, majoring in accounting and finance.

Alex joined Instreet Investment in 2012 as the finance and operations manager and has worked closely with Managing Director/Group CEO George Lucas since then.

He has also been a valuable member of the team, including Australian CEO & Group COO Brendan Malone and James Poon, Chief Product Officer & International, to grow Raiz since it began operations in 2016 under the Acorns banner.

Lucas says: “Raiz is delighted to announce Alex’s promotion to CFO. Alex joined Instreet before it was part of Raiz, and has contributed strongly to Raiz’s growth having been involved in all stages of the business from the beginning of an idea to where we are now.  We are confident Alex will continue to add value to Raiz and look forward to his success in the role.”

Gao says: “I am honoured to be appointed CFO of a company that is enjoying such strong growth not only in Australia, but also Malaysia and Indonesia. COVID tested the business but we have emerged a stronger and more competitive company, with a proven business model through the most difficult of times.  I am confident we have the right strategies and team for this growth to continue apace.”

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CEO Australia & Group COO Brendan Malone says: “We have established the process to allow SMSFs to invest in any of our investment products on the Raiz Invest Platform, confident of their appeal because of the wide choice offered and the very competitive platform fee that includes all brokerage for unlimited trades, no switching fees and automatic rebalancing.

“To date only individuals could invest with Raiz – it has more than 400,000 Active customers – but by making our platform available to SMSFs we are tapping into a very dynamic part of the financial services market.”

Raiz has traditionally appealed to the Millennial market, but with SMSFs it has an opportunity to grow with its customers and provide financial services to clients who are well on the way on their investment journey.

Raiz already has a diverse client base that includes more than 30,000 clients aged 50 or over.

Raiz recently launched a Custom Portfolio offering in Australia, allowing clients to personalise their portfolios by selecting their own ETF and Bitcoin target weightings. The uptake has been very encouraging with more than 7,000 clients representing more than $28 million in FUM using this option since the late January launch.”

Malone says: “Offering a Custom Portfolio gives our growing client base greater choice. As we discovered after offering the Sapphire portfolio with Bitcoin as part of the investment strategy, clients continued to ask us for more control over their portfolios.  We believe Custom Portfolio will help meet this need.”

At 28 February, Raiz had total FUM of $665 million and Active Customers over 405,000.

“Based on the growth rate in FUM in the last three months of 2020 and the momentum in 2021, we are quietly confident of reaching $1 billion by the end of calendar 2021 and believe the offering of a Custom Portfolio and targeting SMSFs will help achieve this goal,” Malone says.

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Moore, a digital marketing specialist who brings multinational board and governance experience to the role, focuses on growth companies with turnovers of between $10 million and $100 million.

Moore has a corporate career with director level marketing and general management experience across 30 countries, having successfully launched and grown Australian and global brands.

His non-executive responsibilities included the chairmanship of CROSSMARK Asia Pacific, owned by the private equity firm Warburg Pincus, and Chairman of the digital marketing company, The Now Communications Group, based in Singapore, and is an independent, non-executive director of the listed company, InvestSMART Group (ASX:INV).

Raiz Managing Director & Group CEO George Lucas said: “The appointment of Kevin, with significant marketing and general management experience in growth companies across Australia and Southeast Asia, comes at an important juncture for Raiz with the business expanding into Malaysia and Indonesia and the growth and consolidation of the Australian business.

“Management and the board are well positioned to take Raiz to the next level in Australia and Southeast Asia with the recent appointments of Brendan Malone as CEO of the Australian business, Kelly Humphreys as a non-executive director, and my increasing focus on the global business as MD/Group CEO.”

Moore’s appointment coincides with the resignation of Peter Anthony (Tony) Fay as a non-executive director and Chairman of Raiz effective 1 December 2020.  Tony joined the Board in October 2016  and played a key role in the Company’s early growth and IPO in 2018.  After four years, he has decided to resign from the board and to focus on other interests.

Lucas says: “Tony has made a significant contribution to the business through his experience of financial markets, management, product development, compliance and risk management. On behalf of the Board and management, I would like to thank him for his board leadership and wise counsel, and I wish him all the best in his future endeavours.”

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Brendan Malone

Fintech companies are moving in on traditional financial services providers as their products and services gain popularity, grabbing market share and talent while forcing down costs.

Traditional jobs may be lost and even one of the big four banks could disappear, according to a panel of the nation’s leading fintech entrepreneurs speaking today at the Fintech CEOs on the Future of Finance seminar, being hosted by OnMarket BookBuilds.

Panellist Ben Bucknell, chief executive officer of OnMarket BookBuilds, an Australian fintech behind OnMarket, an innovative online portal giving retail investors direct access to IPOs, says fintech is reshaping the investment industry and opening up career opportunities for today’s university students.
“Investment opportunities that were only previously available to the very wealthy just five years ago are increasingly available to everyone though financial technology. There’s never been an easier time to transform a good idea into a business plan. That creativity is very attractive to young people. We’re aiming to draw them to fintech before they get trapped in a middle-office role preparing PowerPoint presentations just to feed an outsized mortgage,” Bucknell will tell the seminar, being hosted by OnMarket with the University of New South Wales’ University Network for Investing and Trading (UNIT).

Fellow panelist, Jost Stollmann chief executive officer of Tyro Payments, said the bank of the future will be a technology company with a banking licence. Tyro calls it the ‘Nextgen Bank’ and is building such a business. He predicts one of the big four banks will disappear with the fintech onslaught.

“According to a recent Frost & Sullivan study, Fintech in Australia – Trends, Forecasts and Analysis 2015 – 2020, the Australian fintech sector is set to take $10 billion in aggregated revenues away from the big Australian banks and contribute $3 billion of new revenue to the Australian financial services sector from 2015 to 2020. This train is coming fast. Can an old-style bank respond and stay competitive? Maybe. Can all of them? Probably not. Just think: one of the big four banks could disappear in the next 20 years. The only question is, which one will it be? Unless the banks can unbundle their products, overcome their legacy infrastructure and compete with low-cost ‘provider agnostic’ digital platforms, they might well cease to exist,” Stollmann said.

“Australia cannot afford to be complacent. More and more of this country’s best and brightest minds are leaving the big banks in order to start their own business and reinvent banking. The government, regulators, and the wider community should encourage and enable these entrepreneurs and their efforts. We are well-placed as a country to lead ‘Nextgen’ banking and it will take courage and commitment to get us there.

Fellow panellist Brendan Malone, chief operating officer of Acorns Australia, which has released an app that automatically invests a person’s spare change, says disruptive business models will survive and thrive, forcing down costs for customers while taking some business away from the banks. “Fintech companies will not only be able to capture bank customers, but drive down fees across the industry – in a similar way online stockbrokers did at the beginning of the century across the whole stockbroking industry,” he says. “However, a big challenge for fintech start-ups is winning the confidence of customers; winning confidence about providing a seamless and reliable service to our customers. People automatically have that confidence in the banks, but as a fintech, we’ve had to earn the trust of our customers.”

Another panellist, Doug Morris, chief executive of Sharesight, a leading online share portfolio management software business, agrees costs will be forced down, but only gradually. Traditional financial services jobs too will be lost.

“Technology companies can truly provide lower cost and better solutions, but the overall impact on finance won’t be a massive upheaval of the banking system overnight. Instead, you’ll see a constellation of apps that will have more of a slow burn effect. Remember that it takes wilful and passionate consumers to truly change an industry.”

Like OnMarket’s Bucknell, Morris says the fintech industry is drawing talent away from the banks and other incumbents. “It’s clear that there are fewer qualified candidates joining investment banks, for example, and they are going to tech companies instead. Moreover, traditional financial services distribution and marketing jobs are under threat. I’d encourage [university graduates] to gain experience in analytical, data-driven, marketing if possible. This skill set permeates most fintechs,” says Morris.

Georgia King-Siem, a senior manager with KPMG, says the disruption caused by fintech will continue as financial services become automated and commoditised – but only fintech businesses that truly innovate will stand out and win market share.

“Understanding and embracing innovation and the disruption it brings is necessary for survival – we must evolve or face extinction. On the flip side, those that innovate effectively will have a greater opportunity to increase profitability, productivity and develop a sustainable competitive advantage,” she says.

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