Thomas Brennan, the former head of digital innovation at Discovery has launched a digital stokvel — an app-based investment vehicle that claims to slash the cost of investment.
Called Franc, the app makes investing “simple and affordable for anyone with a smartphone”, the company said. Franc gives stokvel members access to the money market and an exchange-traded fund via their mobile phones.
Franc has no minimum investment amount and investors can withdraw or transfer their money anytime without penalty. There are no hidden or complicated fees, it said.
Access to Franc is free for the first six months; thereafter the membership fee is R5/month, though members can get another six months free for every friend they invite who becomes a member in the first free six months. “Besides the membership fee, there are no other fees or deductions.”
“South Africa has one of the lowest savings rates in the world: for the vast majority of South Africans, accessing investment opportunities is expensive and difficult,” Brennan said in a statement. “This is something that we want to change with Franc, which is now the most affordable way to access the money market and exchange-traded funds.
“Financial services usually offer complex products with high fees, which reduces the value for the consumer, especially over the long run,” he said. “We have removed all the barriers and only kept what really works. There’s no more dealing with brokers, no more paperwork, and no more complicated fine print — everything is done through the mobile app.”
Franc’s investment options include the Allan Gray Money Market Fund, which returned an average of 7.9% in interest over the past year, and Satrix 40, an exchange-traded fund that tracks the performance of the JSE Top 40 largest companies and grew 66.5% over the last five years, an average compound annual growth rate of 10.7%.
Management costs
The Allan Gray Money Market Fund charges 0.29%/year in fees; the Satrix 40 charges 0.25%/year. These fund management costs are deducted by the fund managers and investment returns to members are net of these management fees and portfolio costs.
“Stokvel members simply choose how much they would like to invest, how often and how they would like to split their investment,” Brennan said. “They can choose between the lower-risk Allan Gray Money Market Fund or the higher risk Satrix 40 ETF, or a combination of the two.”
Because Franc is a stokvel, prospective investors need to be invited to join. When they sign up, the system will match them with someone they know.
Franc is a member of AlphaCode, the fintech investment arm of Rand Merchant Investment Holdings. The team comprises eight professionals who have backgrounds in machine learning, software development, smart contracts, compliance, legal, investment and actuarial science.
Franc is available in the Apple App Store and Google Play Store. — (c) 2018 NewsCentral Media