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Investing is too complicated for SA’s small investors – what to do?

By Thomas Brennan, CEO of Franc app

South Africans do not have a good reputation when it comes to saving. Those who do save and want to invest face a number of obstacles – they earn little to no interest, they can’t get easy access to investment funds, products are complex, minimum investment amounts are too high and they pay high fees to invest.

Most South Africans say they experience overwhelming or high stress regarding their financial situation, so it is little wonder that the barriers to investing are too much to overcome. They simply give up and keep their money in a bank savings account, where it attracts little to no return.

It is estimated that over R300bn is sitting doing nothing in current accounts, which benefits the banks’ bottom lines the most. This tells us that consumers don’t know how to get their money to work for them. But South Africans are evidently keen to learn, how to invest and investment apps are popular Google searches and South Africa is in the top five countries in the world for these search terms.

Franc is an award-winning app that helps South Africans save, invest and learn about investments. And despite the Covid hangover and depressed economy Franc had its busiest month ever in January 2022. We also had over 400% customer growth over the past 12 months.

Most people who save small amounts do so to create an emergency fund. This is the most common goal for Franc investors. As the past two years have highlighted, an emergency fund is an excellent idea only if your money is easily accessible. Most investments don’t give savers quick access to their money. As a result, they default to keeping their emergency money in a savings account for easy access.

We recently launched locked goals, which enables a user to lock their investment goals until a future point in time – so that the money can’t be touched until it’s released on a certain date. This helps to keep their savings on track and removes the temptation of using the money for non-essentials. Over 50% of our new users have locked their investment goals since we launched the feature.

We have seen that the main barriers to retail investing in South Africa center around product complexity and minimum investment requirements. We were frustrated by so many South Africans who have no savings or investments, that we decided to create the simple-to-use Franc app.

Consumers are often intimidated because investment products are so overwhelmingly complex. We minimized the complexity by narrowing the investment choices to just two funds, the Allan Gray Money Market and the Satrix 40 ETF. Our aim is to make investing inexpensive, uncomplicated and accessible.

Investment products often have minimum investment requirements and usually require consumers to start their investment by depositing a lump of as much as R50 000. This immediately excludes the majority of South Africans.

With Franc, people can start investing with as little as R10 per month – there are no minimum amounts for investing. In a world where there is an app for everything, the Franc app for investing can be used by anyone with a phone.

Within a few minutes, you can start with any amount of money. The Allan Gray Money Market Fund available on the app provided a return of around 4.5% over the past 12 months. The Satrix 40 ETF has returned 12% a year on average over the past 3 years and 10% on average per year over the past 5 years.

Franc was created to make investing extremely simple and affordable and to ensure that, in just a few minutes via the app, anyone can invest in leading cash and equity funds with no minimum investments and no paperwork.