EasyEquities’s Charles Savage on that R25 fee; Purple’s share price; BHI; and Philippines

Easy Equities has been grabbing lots of social media attention over the past week after a R25 fee elicited unhappiness from some of its one million active clients. Freshly returning from his fourth visit to the Philippines this year, CEO Charles Savage explains why he’s delighted at the response and shares his thoughts about a share price that last month bottomed at a mere one-sixth of its recent peak. He spoke to Alec Hogg of BizNews.

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Relevant timestamps from the interview

  • 00:06 – Introductions
  • 01:17 – Charles Savage on social media reactions to the R25 fee
  • 04:27 – Partnership with Discovery
  • 06:13 – You can’t please everyone
  • 09:47 – On the EasyEquities share price
  • 12:57 – On the shareholders and if it has been negative, the kick back from the decline in the price
  • 15:23 – On being a Saints boy and the Craig Warriner ponzi scheme scandal
  • 17:55 – The Philippines project
  • 22:06 – Conclusion

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Edited transcript of the interview between BizNews Founder Alec Hogg and EasyEquities CEO Charles Savage

Alec Hogg: In this issue of Undictated, we unpack the interesting discussions, Furore, perhaps you could call it, about EasyEquities. More than a million clients. It’s bringing in fees per account. We’ll find out exactly why, what’s happening there, what’s happened to the share price, what’s happening in the Philippines. Charles Savage is the Chief Executive and founder, and a very popular keynote speaker amongst the BizNews community, as you will be again in March next year. It’s going to be great fun. We having our biggest business conference yet. The sixth one, you’ll be back again, Charles look forward to talking with you there and having an update at that point. But right now the EasyEquities community, more than a million people who are within your community are going to be seeing a different world in future or not. Just help us through this. Lots of social media discussion about this 25 random months.

Charles Savage: Yeah, Alec, thanks for having me on. I’m looking forward to the BizNews conference. What a lineup. I’m privileged to even stand on the same stage as some of those. Back to EasyEquities and this Thrive Fee, which essentially we’ve been criticised to say that it’s a platform fee versus the way we positioned it as a loyalty fee. But I think the fundamental construct of the fee is it’s there to try and drive positive investment behaviour so that people in the outcome actually achieve a cheaper platform experience than the one that they currently enjoy, which as you know is the cheapest in South Africa, without having to do a hell of a lot. And fundamentally, if you take how much time it might take you to buy a cup of coffee, and in fact the cost of a cup of coffee, if you spend that money on the platform every month or less, in fact you can spend one round a month, you avoid any additional fees and you secure a cheaper platform. Or if you spent that same amount of time, if you’ve got no money, because we recognise that times are tough. And so if you just spent a little bit of time educating yourself or doing things on the platform, then you could have also avoid the fee. And so for us, it’s not a platform fee because a platform fee gets charged regardless of your behaviour. It’s a behavioural fee that is designed to either get you to invest time in your own portfolio or knowledge or alternatively, pitch up and make a one-round deposit once a month. And that’s what it isn’t a funeral. That’s what the debate and the discussion is all about.

In the main, it’s been very positively received, despite what you’ll see on Twitter. But obviously, people that are happy with it are not shouting about it. And so those that want to engage us, which engagement has been unbelievable. I mean, this whole week or last week has really reminded me that we’re best at the centre of the arena. It’s great to get client engagement and feedback. And as a result of that feedback, we’ve made two updates to it today, which I think improved the program, which we didn’t think of. And the first is that if you have a fully funded TFSA account, you’re exempt. And so we don’t want to penalise people that are doing the right things. And then the other one is, which I think created the most concern, is that in our terms of conditions, which it hasn’t changed, we have the right to collect fees by selling your investment. It’s been in our terms and conditions for nine years. This process or this Thrive Fee highlighted that, and so there was a big furore about it. And reflecting on that, despite the fact that it’s been around for nine years, we’ve committed and we will commit it over email today and in the terms and conditions that we will implement the ability for clients to set a preference in terms of how they want their fees collected. And one of those preferences will be from your investments, but we’ll set up things like debit orders and others. So… That’s what it’s all about. And it’s been, it’s been wonderfully engaging. I must say, I actually can’t remember a week in the last three or four years, other than I guess when we went into COVID, where we’ve had so much engagement, so much media interest, and that’s gotta be a good thing for the business.

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Alec Hogg: Has it got anything to do with your new partnership with Discovery? Cause it sounds awfully like Adrian Gore and you have been swapping notes or you’ve been listening to what he said to say.

Charles Savage: You know, Vitality is the most successful behavioural loyalty program in the world. And so if you don’t take notice of that, then you’ve got to be asleep. So no, they had nothing to do with it, but was there, did their thinking influence us in the sense that we, did we look at other programs? And we did. We looked at all of the successful loyalty programs around the world that drive behaviour. And in essence, the balance between carrot and stick has to be has to be strong enough that it pushes the desired behaviour. So as an example, had we made the fee one round, we wouldn’t have got any behavioural change. You’d everyone just go on one round. And it seems, if you look at the discussion on Twitter, seems like we hit the right threshold at 25 round. It’s not a lot of money, but it’s enough money to change behaviour. And that’s what you wanna get the balance right. And it is our deep desire and wish that nobody pays the fee unless they willingly want to. But if you just pitch up, as I said, and spend a couple of minutes or one round a month, you avoid the fee and you get a cheaper platform. I think that’s the point that’s been lost on everyone is by doing that, you don’t retain the same platform. You actually get a cheaper platform with more benefits and lower costs and lots more benefits coming in time as we launch new services in the year ahead.

Alec Hogg: So when you get to talk to people who are angry, like Jonty Sacks, who’s a member of our community who’s been writing on the WhatsApp premium group, he’s got a big portfolio, he’s moving it all away from EasyEquities, doesn’t like what you guys are doing. Do they listen? Do they actually get where you’re going with this?

Charles Savage: Yeah, I think 90% do you can’t, you’re not going to appease everyone Alec. But I think, you know, what I’d say to Jonty, because I haven’t actually reached out to him or spoken to him, but what I would say to him, Jonty and John and others like Jonty is that a good business relationship between a customer and the organisation is one where firstly you trust in each other. And secondly, you both make a commitment. And what we’re saying is, and what we’ve demonstrably evidenced for nine years is that we’re committed to constantly improving the platform. You’ve been around it at a right from the start. To start with, it was just South African equities. And look at it today. You can trade the world, you can trade across asset classes like properties and crypto, you can do your FX on the platform, and it’s got easier and simpler to open an account. And that’s our commitment to this relationship. The other side of the coin is what we’re asking customers to commit to. It’s just pitch up once a month. Just walk through the turnstile once a month, and you get a cheaper platform experience. And I think that’s a fair trade. I don’t think any business relationship, or any relationship, just think about your marriage. It doesn’t work if the one participant is living by their commitments and the other one isn’t. And fundamentally, the commitments we’re asking you to demonstrate, the evidence, are in your benefit. I.e., they get you cheaper access to the platform.

But importantly, they mean you’re engaging with your portfolio. You’re thinking about it once a month. And anyone who’s serious about investing or retirement should be thinking about it at least once a month. And so I would say to John T, I get it. You know, I get his anger because it hasn’t been like that for nine years. Change is never comfortable to make. But I would say if this was a marriage, John T or anyone like him, is it an unfair ask of us? to ask customers to pitch up once a month, not necessarily with money, but then with time, or alternatively just with a little bit of money, one round. And I look at myself from the mirror and ask myself, honestly, if I was on the other side of this equation, could I scream and shout and say this was an unfair change? And I don’t believe it is, given our commitment to the platform, which to start with was very simple one trick pony. Today is a highly complex platform. Security and safety and stability of assets and assets has to get better and better all the time. And those don’t come for free, you know, keeping hackers off a portfolio and making sure the platform is stable and scalable. Those are things I think customers think about every day. Those are things that we think about every second of every day and they’re not free. And so I think it’s a very fair trade. And those who don’t think so, obviously, they have a choice. They can find an alternative platform where they think they get a better, they get better value. than ours and therefore they can move their account. We’re obviously comfortable with that. We wouldn’t have made this change if we didn’t think it was fair and if we didn’t think people had choice and they have both those things.

Alec Hogg: Charles, you did say a while ago that the market has changed and it doesn’t really support exponentially growing companies like yours or more risk on companies like EasyEquities. And we’ve seen that in the share price. The share price getting down to levels that many might have thought were impossible to reach. But has that had an influence on what you are doing now? We’ve seen your trading statement. Clearly that the company is not flourishing to the degree that it might have been in a different environment. Your share price having hit 60 cents at a recent time, remembering it was six times higher than that not long ago, is also reflecting some kind of concern from the market. Has that played any part in this decision?

Charles Savage: Look, and Alec, I’m in a closed period, so I’ve got to be careful what I say. So, you know, I’m not going to talk to the results. They’ll be out at the end of November and then let’s have a proper discussion around the results. But, you know, what is, well, let me talk about the environment. You always build, in my view, you build better businesses in tough times. You know, you’ve got to look at the cost side of and the income side through a different lens than you do in good times. And, you know, we’ve come out of a very strong bull market into a recessionary environment, and I don’t think it’s a debate. We’re in a recession. And as a result of that, we’re seeing what client behaviour looks like on the other side of the coin, if you like, in a bear market. And so are we modifying the business model based on what we see in a bear market? And understand this is the first bear market that EasyEquities has traded through. And so 100%, we are looking at the environment, the lessons that come from this environment. what the data is telling us and saying, what is the appropriate response from the business to try and modify some of the behaviour we see. And so Thrive probably would never have been born in a bull market, but that doesn’t make it a bad thing. In fact, for me, I honestly think you just build much better businesses when you’re looking at a business through a recessionary lens. And so Thrive is a response to much more difficult times, but understand this, difficult times. and trying to get us front of mind with our customers once a month. So they think about us once a month. And if you just look at the last week, we were front of mind. I can’t remember a period when we got so much media interest and attention, when we were where there was so much, you know, so many voices on Twitter talking about us. And if you just on that case alone, that’s a success. We were front of mind again. And that’s what we want to do. We want to be front of mind once a month. It’s not about improving our income statement, it’s about improving the behaviour of our customers which in time will improve our income statement. And just being front of mind once a month is all we need.

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Alec Hogg: Connections and engagement. It’s a bit to you, well, you may even be talking of the business model, because if you don’t have engagement with your tribe and your community, then very soon they forget about you and they’ll go off and perhaps invest their time elsewhere. And anyone investing their time with you, as you’re now showing us, is valuable. It’s valuable for EasyEquities, because presumably if someone’s looking at their investments, they might be improving it. But from your perspective, as far as the share price is concerned, you’ve got a lot of your customers who are also shareholders. Has there been negative kickback from that, from the decline in the price?

Charles Savage: Yeah, I mean, obviously there has. You know, I think if you look at the share price action over the last, let’s just go, let’s rewind kind of two years. You know, we’re a small cap and so we’re very heavily influenced by small volumes. I mean, that’s the truth. And, you know, there was exuberance in the share price, which was driven to, in my view, unrealistic levels. But they were on very small volumes. So, you know, anyone who kind of looked at the volumes at those very high levels, so, you know, you mentioned it six times about where we are today. You know, you would have seen that wasn’t institutional buying or high volume buying. And then the, and so, and I think the opposite is not true. We’re, because again, we’re influenced by very small volumes. If you, we’re trading at levels that I don’t believe demonstrably evidence the value of the group. And I, you know, openly say that. So, you know, there’s somewhere in the middle of those two prices where people will find value and people will find value at a different level, you know, based on their review of the company. But it’s the kind of the part that I guess is disappointing is just how little volume influences the value. And that’s kind of a small cap, you know, small cap problem in the South Africa where you’re just your lack of liquidity means that your share price can be heavily influenced either way, positively or negatively, by small changes in perception and therefore volume. And I think that’s where we find ourselves on both sides of that. It feels great when it’s going up, and it feels just as disappointing when it’s going down. But, you know, personally, the middle ground is where I find value in the share price.

Alec Hogg: I had someone get hold of me when they heard that we were going to have a conversation and said, Charles is a saints boy. Carl, who works with you is a saints boy. And now you’ve got this saints old boy called Craig Warriner. Who’s been running a Ponzi scheme. Were these saints boys all together at the same time? Now my response was very quick to say that no, BHI Trust was not on the EasyEquities platform. But I guess these kind of discussions do need to be addressed.

Charles Savage: Yeah, I mean, I’ve never met Craig in my life. I don’t know what year he was at Saints. I’m not really an active participant in the old boys society either, where he apparently was quite active. So, you know, I’ve got nothing to say about it. I don’t know anything about it other than what I’ve read through BizNews. And very sad to see, you know, how many lives will be affected by it. But no, there’s no connection to EasyEquities or to me personally. Saints is a big school, been around a long time, I’m sure. I’m sure he’s not the first person that says to run a Ponzi scheme. Hopefully he’s the last, but you know, it is what it is. It’s a very sad event and let’s see what comes out of it. And hopefully clients get some recovery in the assets. I personally know people who’ve invested in it. Now they’ve sort of come out of the woodwork to say they invested in it. And sad story, but no connection to me or EasyEquities or whatever.

Alec Hogg: It is horrific though, that people will still go into an unregulated fund like that, because it’s a secret, because like Madoff, you’re part of a select little group. And I guess EasyEquities as a whole credo is exactly the opposite, that you’re there for everybody and at the lower price.

Charles Savage: Yeah, and Alec, I mean, I don’t know, I might get this wrong, so don’t hold me to it, but I think we hold 18 licenses across the group. You know, just so you know, we’re heavily regulated, highly licensed, the market, you know, that our shareholders include Sanlam, which again, should be given, you know, Sanlam certainly weren’t invested or shareholders in BHI. And so that should give everyone comfort. We’re listed again, there’s a level of compliance that’s required and audits, etc. So you know, it’s, they can’t even compare the two. It’s not, you know, it is sad that people still invest in these unregulated spaces. I think the saddest part is that some of them were advised into that space. And that’s where I think there’s gonna be real accountability. Like how did you, how did an advisor put money into an unregulated space? That I guess is the biggest concern.

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Alec Hogg: And you drive past those advisors every day when you go to work. Well, certainly your old offices, that global and local, the old metal box building, pretty awful, awful. Just to close off with the Philippines, your big adventure there, looking back on that, given what’s happened. Are you still excited about being about doing it? Or is it something that you scaling back on, given that there’s lots of challenges in the environment that we’re all in.

Charles Savage: Yeah, I mean, Alec, I’ve just got back from there and it’s my fourth trip in 18 months. So, you know, actively going and, you know, the good news is each time I go, we, there’s more opportunity for us to partner in the region. And that’s, and we’ve, and we really are building a brand. So we’ve just finished the game. We ran the game for three months, 330,000 people pitched up to play the game, which we now have a relationship with. And, you know, go back nine years, we ran a game as well. And we had 2000 people play the game. And so it’s just orders of magnitude bigger. And that’s the good news. People now know who EasyEquities, the regulator, knows exactly who we are, and we’re building brand and trust in the region. The bad news is, and this is kind of, you know, I guess we were naive to think that, you know, we could come in as EasyEquities and everyone would know who we were, and they would just approve what we do. We’re finding it much harder to get regulated with our products and services in the market. And it really is a trust and understanding thing, you know, where, who are we, what do we do, and how do we do it differently? And we do it very differently from the rest of, you know, the stockbrokers. So it’s, you know, EasyEquities isn’t the same as everyone else in that market. And so it’s proving to be much harder to get our products to market. And, you know, what that means is that the disappointment is time, but will we go live? 100%, we will go live in the region. We just have to meter how much we spend because, you know, we don’t have, we have no certainty on the timeframe yet.

And so we’re going to reduce our exposure in terms of spend rate until we get more certainty. Our partnership is getting stronger with GCash. The game that we built was a built with them. It was run as the GCash global stocks investment game powered by EasyEquities. And that’s been a raving success. And so their relationship with us is improving. And they’re the biggest mobile wallet in the region in Southeast Asia. I think they’ve just reached 75 million customers. So there’s lots to be excited about, but we must be cautious around, I guess, predicting when it will happen. I take full responsibility for that. I’ve been too overly optimistic about when we would get live. And it’s kind of in my DNA to be optimistic. And so I just want to be a little bit of pessimism. Will we go live? Yes. When? I’m not certain. And we’ll keep the market updated as things happen. But I’ll leave by saying this.

There is nothing like us in the market, nothing. And the opportunity to partner with lots of partners is more significant than it was in South Africa. And we’ve already partnered the biggest, so there’s really no need to partner outside of them. And so, you know, my optimism for what we can achieve in that country is far greater than what we can achieve here. It’s 120 million people, and we get access to, you know, 75 million the day we go live. But… We’re going to have to work harder to go live and build better relationships and greater trust with the regulator. And we’re doing that. And I’ll keep going back. We’ve got 50, 55 people on the ground in the region now. Most of those are actually engineering resources. So they’re supporting the group. It’s not a part of what they’re not marketing resources. So they resources that we’ve hired, as opposed to hiring here in South Africa for the same engineering resources. We’re hiring them in the Philippines because we’re finding it easier to find resources there than here. So I still very positive about it, but very cautious around time. And I guess if the world is slightly different around equities, we might be in market. I think if I look at the local market exchange, so the PSC, which is the equivalent of the JSC, their local volumes are down 70% year on year. And so there’s heightened concern that if we launch EasyEquities, which is global stocks in the region, that 70% could go down even further. And I understand that. In a world where you’ve lost so much volume, the local brokers are nervous that we’ll take more volumes away. And so our response to that is actually to think about launching a local product first and not the international stock to prove our worth.

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