15 Minutes with George Lucas, Founder of Raiz Invest
(note: interview has been edited for brevity)
George Lucas is the founder, Managing Director of Raiz Invest Limited. George founded Raiz back in 2015. His expertise is in retail product strategy, managing investment risk, portfolio management, financial quantitative methods and regulatory compliance.
How has Covid-19 impacted Sydney, and have your offices made any adjustments in relation to changes in regulations?
It’s just a bit quieter at the moment, there’s only 30% of people coming into the city at the moment. I think we’ve only got about 3 cases a day at the moment. We’ve made some adjustments and we survived!
First off, I’d like to congratulate you and your organisation for hitting $500 million dollars under your management! It certainly hasn’t been an easy feat!
We’ve seen reports saying people have become good savers in this environment throughout the whole industry, banks have witnessed deposits rise as well.
So is that the only major change? Were there other changes?
Not really no. In the Aggressive Portfolios and things like that, there was a bit of a down period in end of March and early April, but it picked up pretty quickly straight after that.
I’m particularly interested in Raiz Rewards, because I don’t see other micro-investing apps offering anything like it . How long did it take to set up?
It’s a cashback program, if you shop at one of the partners they will reinvest money in your portfolio. It took about 6 months to set up, and it was an idea that came out from America.Initially, we started out as Acorns and was part of a joint venture with an American company Found Money, and morphed into Raiz Rewards when we rebranded. We had to build the infrastructure for Raiz Rewards, and we went through an affiliate marketing program. For example there are deals you would see on a Qantas site, a lot of them are from affiliate marketing programmes. There are loads of affiliate marketing programs out there, we just tapped into that.
You’ve been outspoken in the past in about Commonwealth Bank’s tactic to reduce competitions. What do you think needs to be improved upon in the industry?
Where do we start? At the end of the day, the government has a policy of oligopoly run by the four major banks, but they shouldn’t pretend to encourage fintechs at the same time. It’s the environment of the industry since the 90s to make sure the big four Australian banks dominate the industry since. There’s a lot of discussion about competition amongst financial services, but that’s not the government’s overarching policy.
So, Raiz has recently set up joint ventures in Indonesia and Malaysia. What made your organisation pick Malaysia and Indonesia?
We’re a micro-investing app for mobile phones, and those two countries skipped the PC and went straight to smartphones. Our app is about improving people’s saying habits, the mass-mass, not the high net-wealth. Therefore these were the perfect target markets for us. Indonesia probably has 65 million in the middle class or consumer class, and will be 110 million by 2030. Having a product which helps improve the wealth side of their equation rather than their lending side adds value to the lives of Indonesian people. These reasons are exactly the same for Malaysia.
What were the different challenges of setting up in these countries and Australia?
Malaysia is under English law, so the regulatory ways are similar to Australia. There’s a lot of cooperation between Malaysia,Singapore, U.K. and Australia in terms of financial regulations. Indonesia, just because their regulations don’t run under English laws because they were a Dutch colony, so they have a completely different legal structure. So the challenges were completely different in both countries, finding a partner for joint ventures was a challenge. Getting through the regulations for us, coming from Australia required understanding, and also the ongoing cultural differences in Indonesia and Malaysia.
How are the apps performing in Malaysia and Indonesia?
They are doing really well. Malaysia’s way above expectations. We thought we would have 60,000 people at the end of the year, and we already have 70,000 users. Indonesia’s also doing well!
What are your predictions about the next generation of investors?
To be honest, I don’t have any predictions about the next generation of investors. We’ve put Bitcoin into one of our portfolios because it’s more relevant to a younger age group than investing in gold.
One thing we see is people are becoming a lot more global. For example, apps that give you access to buying American stocks from Australia are popular. That was a change which wasn’t here ten years ago. Things like Bitcoin are becoming a lot more prevalent in people’s portfolio.
A quarter of investors (24%) said they had bought or sold investments based on ESG regulations.
There are not as many people concerned about ESG as you’d think, there’s still 20–25% of people in our database in the Emerald Portfolio, as opposed to a majority. It’s quite interesting because the younger you get, the less likely you are to be in the Ethical Portfolio. We find the Ethical Portfolio is a lot more popular in our Super, than outside of Super, as it is performing well at the moment. It might not be performing well tomorrow though.
What is a piece of financial advice you would offer to everyone?
Well, to automate your savings! It originated from Super in Australia where the government decided 9% of your salaries are going into super before people get their salaries.
So by automating savings through Raiz, where you can set up the automating savings feature through the Recurring savings function, the round-up, or savings goal, it just happens in the background of life is the way to do it. If you don’t automate it, and take your savings out it just doesn’t work effectively. It’s one of the reasons why Super has done so well in Australia, because it happens in the background of life.
