In December 2016 Liberty launched an innovative app that was developed to encourage South Africans to start investing in a simple and low cost fashion.
Called Stash, the app is designed to be non-threatening in that it invests small amounts of your cash at a time. The way it works is innovative – every time you swipe your debit or credit card, Stash detects the transaction, rounds it up to the nearest R10 and invests this ‘roundup’ amount into a Top 40 tracker fund managed by Liberty.
The product incurs no fees – none at all – and is meant to appeal to the younger generation.
“Everyone [asset managers] wants a bigger slice of the same ‘retail affluent’ pie. And this is what attracts expensive distribution models,” says Juan Labuschagne, head of development at Stash. “We are trying to make the pie bigger by targeting younger South Africans who have an aversion to investing. We want to get them started.”
Despite very little above-the-line marketing, Stash now has 40 000 clients who invest about R200 a month on average. Of these, 65% are younger than 35. Collectively, Stash clients have invested some R20 million.
The app is entirely digital, which means clients receive no monthly statements. This was deliberate, says Labuschagne. “We have opted to be entirely digital. In the same way that Netflix does not have a printed catalogue, we do not send out statements showing returns – this information is available via the mobile app and returns can be viewed online.”
Simple and low cost. What could go wrong?
Quite a lot it would appear. According to emails that Moneyweb has received from disgruntled clients, it is difficult to withdraw your funds from Stash, and when you have a problem, communication with Stash is cumbersome and slow.
“I have been investing in Stash and accumulated almost R10 000. Everything has been professional and even fun. Now there is one exception, I cannot get Liberty/Stash (on 3 occasions and many, now angry, emails) to repay me my money. In writing to you, you’re aware of this vital flaw in the trust relationship between investor and bank. That’s important to Moneyweb, a brand I respect.” Jack
“My wife and I both use the stash the cash app but have become very worried in terms of trying to withdraw cash. My wife no longer wants to do it and they have bean messing her around for over a month asking for different documents etc. There is always an issue. It seems they like to take your money but it seems they are not that keen to give it back when you want to cash out.” Clyde
In discussion with Moneyweb, Labuschagne acknowledged that there have been complaints, but says this number is less than 200 out of 40 000 investors. He adds that the people who complain are often older investors who are more familiar with traditional forms of investment. He agrees that when clients experienced problems with Stash, these are quite often related to cashing funds out of the investment.
There are two hurdles, he says. The first is that investors can sign up with Stash and begin investing within minutes. However, before they can withdraw funds they need to upload Fica documents to Stash – ID and a proof of residence.
Once the documents are uploaded it can take up to 10 working days to deposit the funds in a client’s account, though it is usually closer to four, he says. This is because the banks process the payment as a refund on a debit or credit card, rather than a simple deposit.
“Because signing up with Stash is so quick, this creates a mismatch in expectations,” says Labuschagne. “People expect the cash-out to be as quick, but it is not always. I completely understand why a customer might think that Liberty is deliberately holding their cash, but it’s not the case. The second you click that button it goes through to Liberty, which is our investment administrator, and to the payment provider (the same Standard Bank-owned company that manages Snapscan), but refunds take time. The Payment Association [of South Africa] is looking at realtime payments processing.”
In the meantime, he says, Stash has made an effort to improve its communication – asking clients to upload their Fica documents and warning them of the delays. It also now communicates directly with clients once the amount is settled by the bank. “People don’t look for a refund, they look for a deposit.”
Communicating with Stash is another area of frustration – there is no call-centre and all complaints are managed by email. The responses can be slow and at times appear automated.
According to Labuschagne, emails are not automated and queries are managed by a team of agents. Complaints are escalated, he says.
“At the end of the day this investment is free – it is the only fee-free investment in the country. As such it does not have the same level of instant support. There may be a delay in the response, but we are always working on improving our service and our communication.”
Another complaint relates to the low level of returns on investment. To be fair to Stash, the JSE Top 40 has delivered a -2.39% return this year, but a 16% return since December 15, 2016, so returns depend very much on when one began investing with Stash. To be fair to investors, the below table is the only information provided by Stash on returns (which include dividends). Perhaps Stash could be more forthcoming with returns information – a link to the Liberty fund could be helpful, or a table showing JSE Top 40 returns.
In a country with very low investment rates among certain segments of the population, Stash is a refreshing innovation, despite the gremlins. These developments should be nurtured and encouraged. That said, as the saying goes ‘trust is earned’ and whether you are a big brand like Liberty, or a little no-name brand, trust can never be assumed.