Raiz Invest reports continued growth in customers and funds under management

Raiz Invest ASX RZI superannuation rewards
Raiz Invest's funds under management for February totalled $464.67 million.

Financial services company Raiz Invest (ASX: RZI) has published interim company performance results indicating that Raiz increased the number of active paying customers and total funds under management (FUM) in both the past three months and over the past year.

In a statement to the market this morning, Raiz reported that its funds under management totalled $464.7 million at the end of February, down 3.5% from $481.6 million in the previous month.

However, on a quarterly basis, Raiz increased total fund capital by 6% and recorded a 60.5% increase compared to the same time last year.

In terms of active customers, Raiz expanded its total customer base by 0.9% in February, by 5.4% in the past three months and by over 20% on an annualised basis.

Very noteworthy for Raiz was that funds under management within superannuation saw the biggest growth even though retail deposits continue to constitute the lion’s share (82%) of all funds being managed by the company – a tentative indicator that FUM are gradually rebalancing towards superannuation investments.

“Raiz is well placed to manage the volatile market conditions with 66% of revenue being generated from the $2.50 a month management fee from active customers, 14% of revenue coming from fees related to funds under management, and the rest from other income, advertising and netting,” said Raiz chief executive officer George Lucas.

“In a period of heightened market volatility, this revenue diversification ensures Raiz is in a stronger position compared with businesses that only generate income from fees related to funds under management,” he added.

Silver lining

In response to the company’s sluggish start to the year, Mr Lucas explained that the decline in total FUM in February, although disappointing at face value, was significantly less than the 8% decline recorded by Australia’s benchmark ASX 200 index – a potential sign that broader market factors were responsible for Raiz’s start to 2020.

According to Mr Lucas, Raiz customers were keen to harness the company’s platform to switch between portfolios in January with many opting to switch from aggressive to conservative strategies given the wider market themes that are affecting asset values.

Mr Lucas suggested that given customers’ propensity to maintain their investments instead of withdrawing their funds, reflected “increasing maturity” amongst Raiz customers using its platform.

“The company continues to be well funded to execute its strategy following the $7.5 million capital raising that was completed in November 2019. During the last quarter of calendar year 2019, Raiz generated positive operating cash flow and held $12.2 million in cash plus term deposits at 31 December 2019,” said Mr Lucas.

Raizing business

Currently, Raiz is Australia’s largest, mobile-first financial services platform that was specifically designed to encourage customer investments and savings in superannuation – an Australian cultural tradition whereby people actively manage their own retirement savings and investments during their working lives.

The company’s offering allows people to invest spare change automatically from everyday purchases into a diversified portfolio.

Raiz then constructs and optimises diversified portfolios with help from the Nobel Prize winning economist and father of Modern Portfolio Theory, Dr Harry Markowitz.

Dr Markowitz is currently a professor of finance at the Rady School of Management at the University of California and he is best known for his pioneering work studying the effects of asset risk, return, correlation and diversification on probable investment portfolio returns.

In order to deliver its investment platform, Raiz offers its customers access to a range of investment baskets via an app or its website.

Since launching in 2016, Raiz has grown rapidly, amassing more than 1 million downloads, over 832,000 signups and over 220,000 active monthly customers. Over the past four years, Raiz delivered 13 new product releases and continues to develop its platform with a view of adding functionality and generating more customer growth.

In 2017 and 2018, Raiz was named as Australia’s Investment Innovator of the Year and Investment Platform Innovator of the Year in 2019 at the FinTech Business Awards.

The company also picked up the Australian FinTech Award for FinTech Innovation in Wealth Management in 2018.

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