The savings and investment culture appears to be on the backdrop across Africa, possibly due to the high unemployment rate on the continent as well as the several menial jobs available that cant offer payment to sustain a household.
This sad situation definitely has led to a poor investment culture in this part of the world.
Franc, a South African startup on realising this backdrop stepped into the fray to drive a case for investment.
First of all, changing the narrative which will go a long way in helping first-time investors live their dreams, and it is doing this through the provision of access to the best cash and equity funds without minimums or restrictions.
Techbuild caught up with the co-founders of Franc to understand how the startup is driving the change from the Southern part of the continent
A background on how Franc started
The idea that led to Franc was born in 2018 when an engineer, an investment expert, an actuary and a tech whizz, shared a common idea of making investing accessible, affordable, and social.
Dr. Thomas Brennan, CEO, of Franc, after working in Discovery’s R&D lab coupled with his exposure to a broad spectrum of financial services, found it mind bugging how only 5% of South Africa was involved in investing, despite it standing among the top searched term ‘how to invest’ globally.
Dr. Brennan on discussing this with his friend Sebastian Patel who now doubles as COO and co-Founder of Franc, discovered that the poor spell of investment in the country was likely due to financial barriers, product complexity, and limited access.
The duo on agreeing to this saw an opportunity to create a simple investment app that offers access to leading cash and equity funds without minimums or limitations.
An overview of how Franc works
According to the founders, Franc is an easy to use, award-winning investment app.
It keeps things simple by helping consumers to invest when they are not sure how to start:
“Franc users can get access to leading cash and equity funds without minimum requirements, so users can invest any amount at any time.
There is no paperwork and anyone can set up a profile on the app and become an investor in minutes. Also no restrictions, meaning the money can get withdrawn at any point – without penalties.”
Why would users prefer Franc rather than bank (Take a fixed deposit for example)
Franc is an investment app, which allows you to invest without paperwork or minimums.
“You can manage your money from your phone at any time – add to your investment when you can and withdraw when you want. All for a low annual fee of 1% of your investment.”
Speaking specifically on fixed deposits – these accounts only give you a good interest rate if you leave your money invested for a set period.
“You cannot cash out your money until this set period is over, or if you do, then the interest rate earned becomes lessened.
These products often offer higher returns based on the higher your investment amount is.
With a money market investment like the one we offer, you get a good interest rate no matter your investment size and you can withdraw your money whenever you need it.”
According to the founders, Franc also lets you invest in equities, different from a fixed deposit because it offers a higher potential return.
How well are users guaranteed of their investments?
Franc is a registered financial service provider FSP No. 49998.
“We are transparent and you can always access our Terms and Conditions on our website. We are independent and therefore do not receive any kickbacks.
We make decisions based on what is best for our users. We only win, when they win.”
The founders explained that its Cash Fund (Allan Gray Money Market) is a very low-risk fund so it is highly unlikely that users will lose any of their money invested in this fund.
However, according to the founders, the Equity Fund (Satrix 40 ETF) is a higher risk, which means there exists a chance that users may lose some of their initial investment, especially if they are only invested for a short period.
Engaging the public on investment
We asked the co-founders about Franc’s engagement with the public on investment
“Yes, we do this through our social media pages, customer information events, influencer and public relations outreach, and our own Blog.
Through informative articles, content pieces, and interviews, we try to educate consumers about the importance of investing with a simple philosophy.
Because of inflation, if you only put your money under your mattress or keep it in your bank account, it would actually be worthless over time, but by investing your money, it can grow and become worth more instead of less.”
Franc’s thought on the best form of investment
According to Dr. Thomas Brennan and Sebastian Patel, co-founders of Franc, your money gets invested in our Cash Fund (Allan Gray Money Market) or Equity Fund (Satrix 40 ETF) as per your investor profile.
“What is best for each person will differ based on their individual circumstances and how long they intend to invest.
Once you have figured this out, which Franc helps you do on the app, you should look at performance and cost.
In other words, what is the likely growth of the investment over time, although what has happened before may not necessarily happen again, and how much the fees are.”
The co-founders explained that most investments report their performance by annual growth over a fixed period, like the last 1, 5, or 10 years.
So if investment ‘A’ that returned an average 10% over the last 5 years is a better investment than ‘B’, which returned 8% per year.
However, it’s important to see if the performance is net of fees. Because if investment ‘A”s fees were 2% per year and ‘B”s was only 0.1%, then you had invested R100 in both A and B, you would now have the same amount of money after 5 years.
A good rule of thumb – it is better to pay less for bad performance, which is more often observed in high fee investments.
About South Africa’s investment culture Franc got founded based on an ideal need in South Africa.
Among the G20 countries, South Africa ranks the lowest among household savings rates.
In 2019, the ratio of household savings to disposable income was at 0.15%, which means the ability for a household to weather financial shocks is at an all-time low.
This need has come into alarming focus under the COVID-19 lock-down in which households have been put under severe financial stress.
Only 6% will be able to maintain their standard of living after retirement, with 40% of South Africans having no formal retirement savings.
This is something Franc wants to change, by providing access to high-performing, low-cost investments through a simple and intuitive mobile app.
Franc’s founders believe that too many institutions have made investing overly complicated, with excessively high minimum investment requirements and exorbitant fees.
Franc has removed all those barriers, by doing one simple thing – making leading cash (Allan Gray Money Market) and equity (Satrix 40 ETF) funds in the market accessible to every South African so that they can invest for their future.
Franc recently published a blog article looking at the markets over the last quarter, which you can find here.
Featured Image: The Franc team
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