What’s it all about? Purple Group responds to the Thrive furore

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SIMON BROWN: I’m chatting now with Charles Savage, CEO of Purple Group. They own EasyEquities. Disclaimer up front – I hold shares in Purple Group.

Charles, I appreciate the early morning time. Last week was EasyEquities’s ninth birthday. I remember the launch – democratising investing. Somebody with R100 could own China’s largest tech platform or their favourite retailer. It was disruptive in the true sense of the word. Now you’ve introduced the Thrive initiative. If I jump some hoops, no fee. If I don’t it’s R25 a month.

For me personally, the process would be easy, but I think for a lot of folks, perhaps those with only R100 or something, it gets harder. I mean, you’ve gone against that promise of what you started – that promise of democratising investing.

CHARLES SAVAGE: Morning, Simon, and thanks for having me on. No, I don’t think so at all. Maybe, since you noted the birthday, it’s worth reflecting on what we’ve achieved in nine years. You were around, you watched us, you were competing with us, I guess, at some point.

But we started with a single mission, which was to democratise access to South African shares.

We made it really simple for South Africans to go out and buy their first South African shares – and that’s all you could do on the platform. It was a one-trick pony, and it did it very well.

On the back of that success, though, nine years later, we’ve built a platform that allows you to do so much more.

You can literally buy the world – European shares, UK shares, US shares, South African shares, South African property, crypto. You can do it in a managed way. You can buy unit trusts – and the list just keeps going on. There are FX transfer services, etc. And in that journey, we launched Thrive four years ago. So the one point to make is that Thrive is not new. It’s been around for four years. Thrive was designed [as] a free loyalty programme, which was designed to drive investor behaviour and then track to see whether that behaviour created good outcomes. That is, people who Thrived – were they better investors?

Four-and-a-half years later, we’ve looked at the data and said, look, the best investors on the platform, those who get the best outcomes for themselves, those who are on track to retire and achieve their financial goals, are the ones that Thrive. And so a year ago, we started working on what the fundamental changes are.

A loyalty programme is always a carrot and a stick. If it’s just carrots, then only donkeys who want to eat carrots will go and eat them. So we needed to create a relationship, a stick and a carrot that was sufficient enough to try and modify the broad population of users so that they all became good investors. Again, I want to be clear on this. This is the starting point of those changes.

What I’m loving – and I think people are going to find this surprising – is the engagement we’re getting out of the ones that are enjoying the changes and the ones that aren’t, because there are lots of clients who are loving it. And, as you’ve seen on Twitter, which seems to be the place where most of the disgruntled users are sitting, there are people who aren’t enjoying it.

But the important thing for us is that we knew this would happen. You can design these things in boardrooms, which we have. We’ve chatted to customers, we’ve engaged our partners. But you’re never going to get it perfectly right. So the engagement we’re getting now will no doubt lead to modifications in the Thrive programme, and those modifications will be better in the outcome for everyone. So there might be behaviours that we haven’t engineered or that we are tracking that should give rewards to customers.

But to your point on democratisation, our commitment remains. We invest all of our time, 24 hours a day, seven days a week, 365 days a year, in building the world’s best investment platform. At the same time, our income statement confirms – and our financials will be out again this month – we spend a lot of money doing that, on average about R5 million a month in delivering this platform and products to the market.

What we’re asking customers to do is, if they want to retain the same cost profile – and in fact a better cost profile from the platform – all they need to do is spend less time or money doing either of those two things than they would on a cup of coffee once a month. I think it’s a fair trade.

We’re spending all of our time, all of our money, on ensuring they get the best and safest secure platform in the country, and in the world, in fact. We’re asking users all you need to do is pitch up and spend less time or less money than you would on a cup of coffee, and you retain that.**

In fact, it gets cheaper. I saw the Moneyweb article this morning, which was very balanced. If you deposit R1 a month you avoid the fee. Why do we care that it’s R1, because R1 is not going to change the game? The important point is we want users to think about EasyEquities every single month, because if they think about it every month it’s front of mind. That’s going to drive further engagement.

That’s why I must tell you that this Twitter storm, if you like, which is the only place that there is a storm, is very productive because what I would say to the Twitter users is:

If you spent all of that energy that you’ve spent in the last day, and divide it by 12 months, you would’ve Thrived every single month.

And so I think over the course of the next couple of days and weeks, one, we’ll listen to customers and we’ll modify the programme. And two, I think when the dust settles, people are going to realise that actually the programme is designed to deliver better results for them, and it doesn’t exclude anyone.

Everyone has the ability to either pitch up for a couple of minutes a month – i.e. no money or to deposit R1 and avoid the Thrive fee. And in so doing, we get the opportunity to engage with them at least once a month and make sure that we’re front of mind.

SIMON BROWN: I take your point. Let’s be clear, the Twitter storm is there because people care –  and in truth, that matters. You must have run some numbers and the like. This platform, as you say, is costing you R5 million a month. That R25 from the customers who don’t step up once a month and either pay the money or watch some videos, as the case may be – does that become a significant revenue stream towards that R5 million?

CHARLES SAVAGE: The truth is we don’t know. What we’re hoping for is that everyone Thrives. That’s what we are hoping for. But I think that’s an unrealistic result. So I think it will be a meaningful revenue stream. But people will be able to see this in the months ahead.

This is not about improving our income statement. The money that it produces we want to spend on the community to drive further behaviour and engagement. So the programme is designed to, if you like, self-fund the loyalty aspects of our platform which are all geared at driving positive behaviour. So it’s going to get reinvested in the customers, even defaulting ones.

I’ll give you an example. Let’s just say this month that 100 000 customers don’t Thrive; what might be our approach next month? Well, next month, we might say to them, look guys, we understand that November is a busy month and in December you might have more time, so why don’t you make a deposit this month and you can get back your Thrive fee. I’m not saying we’re going to do that, but we will be doing activities like that.

The whole point of the programme is to drive people’s behaviour. And any money that we make out of the program we want to reinvest in those same consumers, the ones that Thrive and the ones that don’t.

SIMON BROWN: So there’s a bunch of questions and ideas, and I’m not going to credit people because my Twitter account was crazy yesterday. Some users asked: What about small accounts? Say someone’s got R30 000; if they can’t afford the Thrive, if they don’t do the activity, they’re effectively paying 1% a year, R300. That’s a bog-standard industry fee. What about making accounts below R30 000 exempt? You’ve exempted under 21s, you’ve exempted over 64s. What about under R30 000?

CHARLES SAVAGE: Of course, that went through our minds. The minute you put exemptions in around a value number, I think you start to break your democratisation message. In the same way, for the low-value investor we went and engineered fractional shares so that everyone could buy a part of Naspers. So we don’t want to give exemptions around value. We think everyone can find the time or the R1. That’s the truth until that’s proven wrong.

We may create other exemptions. Let’s talk about the exemptions we have created. Why did we exempt young investors and older investors? The truth is we know that 21-year-olds are more focused on their education and other things and don’t necessarily have access to regular cashflow. And so [we] don’t penalise them for that.

On the other side of the coin, the 65-year-olds, hopefully, they’ve achieved everything they need to do to Thrive, and they don’t need a loyalty program to get there any more. As to changing their behaviour, it’s kind of too late, so they’ve got what they’ve got. If we find other pockets, and we haven’t found any ourselves, if customers come up with other ideas around exemption – for example, I think there was a journalist that was moaning about it, and my response to her was: ‘I’ll tell you what. If you publish an article about investing that I could use and publish to my investors every month, and they read that article, what happens if I exempt you and those who read the article?’ That was deemed a good idea. I like that.

So we are thinking about other [ideas]; they’ve obviously got to be easy for us to track, because we don’t want to create systems that are difficult to track because they cost money. So there are other ideas, but I don’t like segmenting users based on their value, because that says that a lower-value customer has less time or less capacity to invest in their own journey, their own goals and aspirations. And I don’t think that’s true.

I don’t think money is a definition for what we can or can’t achieve.

SIMON BROWN: I take that; it’s a good point. The big question – and everyone was asking this – if they don’t have the money [in the] account, does EasyEquities then sell shares to cover the costs? From your support on Twitter it seems the answer to that is yes.

And then the question everyone is asking is, hang on a second, then who owns the shares? My response to that is probably ‘read the mandate’. The client owns the shares, but if they’re in the negative you will sell.

CHARLES SAVAGE: Yes. Let’s go back a step. Firstly, if a client owes EasyEquities any money – because there are lots of places where fees can accrue and we wouldn’t be able to collect them because you’re fully invested – the platform has always had the right, as all investment platforms do, to recover fees from your assets. In the unit trust world this happens every single month. You pay your advisors’ fees. How are those advisor fees collected? They sell your unit trusts. The same happens with share platforms, etc. So it’s always been in the platform.

What are our intentions with this fee? Well, the first thing is to say that we are only going to try and collect the fees twice a year. I must say that our intention is not to sell your shares. So we are giving you six months from the last time that we recovered fees to recover those fees for yourself. Either make a deposit or sell the shares that you want to sell, or receive dividends from your portfolio because that’ll automatically pay the fees.

So our intention is for users to look after how they want to pay the fees. If they don’t pay the fees, then we have the right to collect those fees – and always have in our platform’s Ts and Cs  the right to recover that from their portfolio. The intention is not to, though. But again, we can’t predict. Users might pay all the fees for themselves and we’ll have nothing to collect. There might be a very small percentage of offended clients who haven’t paid, and we might make the decision to, say, roll it for another six months.

I want to be clear on this. Our intention is not to sell their shares. We’ve always had the right to do it, but we want to see how this plays out. Given it is the one point that I’ve been really close to on social media, it’s a valid point in the sense that customers don’t want us to sell their shares. Well, I want to be clear. I don’t want to sell their shares either. And so let’s see how it plays out and let’s work together to see if there’s a better alternative to selling their shares.

SIMON BROWN: Another question is: What about tax-free accounts? Of course there’s a chance here that on March 1 I put my R36 000 in. I can’t add money now.

CHARLES SAVAGE: Again, we’ve thought about that. Tax-free savings is one weapon in your arsenal to retire safely. And so we’ve got lots of other weapons. We’ve got US accounts, South African accounts, properties, EasyCryptos. So our answer to that would be well, start doing something else. if you’ve got the ability to make that single deposit in one month, it probably indicates that you’ve got the capacity to do more than just that.

And so, [on your] R36 000 tax-free savings account, congratulations and well done for doing it. Not many users do do it. But we think there’s an ability for you to do more. Again, let’s see how that unfolds. For example, an RA [retirement annuity] account is exempt from this. So if you’ve only got an RA with us, it’s exempt. The reason for that is that that RA account has a fee structure associated with it. So there’s a wrapper fee associated with it.

So, for now, tax-fee savings accounts are included. Again, we’re open, we’re listening, we’ll see how it plays out and we’ll listen to users. But for now our message is find something else to do on the platform that helps you achieve your financial goals faster. Given the fact that you could deposit R36 000 once off, I’m pretty sure you can make a contribution once a month to something else.

SIMON BROWN: You are telling me to find another R11 over the course of the year. Point taken.

Last question – starting end of November?

CHARLES SAVAGE: Yes. Exactly. The first date is the end of November. Another important point – we’ve been criticised for the communication – the communication is day one communication, that’s the first level. We’ve 30 days of planned communication and engagement in different places. And so what customers have seen is just day one. The first fee run will be on 30 November. I know we noted that it was going to be 30 November. [Chuckles] We obviously know something and everyone else doesn’t – there’s obviously another day on the calendar.

But yes, the point is over the next month, we will unpack this and listen to our customers more. The first few rand will be on 30 November. What I’ll say to users is keep sending your complaints, your concerns and constructive criticism. Tell us what behaviours we’ve missed that’ll make it easier for you to Thrive. The real point is that as long as that behaviour positively contributes to your investment knowledge, and is easy for us to track, we’ll support it.

SIMON BROWN: We’ll leave it there. Charles Savage, CEO of Purple Group, I appreciate the early morning.

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