Purple Group-owned EasyEquities will start charging users a monthly R25 fee on their accounts, which allow everyday investors to buy and sell stocks, if they withdraw more than they deposit during the period.
This raises questions on whether too many customers are selling shares and withdrawing their cash as consumers have less money to invest in a tough economic climate.
The volumes of trades on the JSE has slipped this year amid low consumer confidence and as investors send cash offshore, leaving local brokers struggling to make money.
Purple, which also owns trading platform GT247.com, is yet to turn a profit and had a loss of R10.6m in its half year to end-February. This was, however, better than the R17.7m loss it recorded in the same period in 2022.
It said at the release of its half-year results that the amount deposited into EasyEquities by consumers had decreased by 34.2% to R2.9bn for the six months.
Less money deposited for investment into local or US stocks or exchange traded funds reduces the amount of money EasyEquities makes.
EasyEquities aims to democratise investing by removing middlemen such as brokers, and allowing ordinary people to buy stocks or index-tracking funds directly, but it must spend money on acquiring customers whether it turns a profit or not. The platform allows fractional share ownership for the smaller investor.
It announced the new fee on Wednesday, which excludes those who engage in its loyalty programme and do things such as refer friends to the platform or use their accounts actively and deposit more than they withdraw each a month.
Purple’s share price fell 2.68% to 68c on the news, bringing the fall so far this year to 60%.
Counter argument: Why should the EasyEquities service be free?
— Marc Ashton (@zamarcashton) November 1, 2023
(Amount and communication debatable but insisting service is free?)
There was some negative sentiment expressed on social media as retail investors felt angered by the change, despite the low fee. Some felt the company should admit it needs the income, rather than market the fee as a way to encourage better investing behaviour.
CEO Charles Savage said: “Simply put, if a user takes their financial journey seriously then there is no charge.
“EasyEquities and its community have changed the investment landscape in SA — often against the naysayers and inaccurate facts. We have around 2-million registered users — and we want them, and all of SA, to develop good financial habits — for their benefit and that of our country,” he said.
However, the move raises questions over whether Purple’s revenue has plummeted as high interest rates, record food inflation and a cost-of-living crisis mean its active users, which number about 830,000, are not investing enough.
Purple’s share reached a recent peak of R3.45 in January 2022, and it is expected to release full-year results to end-August this month. These will reveal just how well or poorly EasyEquities is doing,
Banks have reported increasing bad debt and sales have fallen at fashion retailers as discretionary income comes under pressure. This suggests consumer savings may be lower or clients could be selling their EasyEquities investments and withdrawing the cash to live on.
Purple said earlier this year that “the cyclical nature of markets and the economy will impact our clients’ ability to save and invest. We remain determined to pursue our purpose, to democratise investing and empower financial dignity for all while building the world’s best investment platform.”
While EasyEquities had more than 1-million dormant accounts in the half-year to end-February, active accounts increased by 23.8% to 831,082.
The new fee also excludes people under 21 years and over 65 and those with a balance of less than a R25.
Savage said: “It’s about shaping investor behaviour, and most importantly keeping [people] moving towards financial freedom.
“While we spend 24 hours of every day, 365 days a year and millions every month on our part, we are asking investors to sacrifice less than the time and effort it takes to buy a cup of coffee in their own investments, and in so doing enjoy a platform experience with no fee or alternatively accept that EasyEquities delivers exceptional value for which they pay R25 a month.”
The Purple Group is working on launching a similar platform to EasyEquities in the Philippines.
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