97% of South African asset managers under-perform the benchmark over any five year periods (statistics provided by S&P). Additionally, South African asset managers charge one for the highest asset management fees in the world and that’s before a platform fee is introduced.
It’s not uncommon for the total fee to eat up as much as 20% of an investors yearly return.
South Africa’s Arcus Capital is applying machine learning algorithms to analyse the stock market and create risk targeted portfolios using mainly ETFs to make asset management simple, affordable and accessible to everyone to help them achieve their financial goals.
“We help advisers and direct customers to determine their financial goals and help them determine their risk appetite,” said Shaun Krom, Arcus Capital’s CEO. “We then suggest the most appropriate investments for the user. We have a very intuitive interface so that a user can understand the impact of making one investment over another investment and then show them how likely they are to meet their future financial needs.”
The platform works simply. An advisor or customer uploads all the customers details online together with their FICA documents which is stored on the cloud. Users can login any time and receive updated information. All subsequent reporting is automated at a 66% savings in costs to the user.
Furthermore, many people are unsure what to expect from their investments and then they either sell or buy at the wrong time or change over their investment managers too often. Arcus Capital, using its algorithms, can produce portfolios at a fraction of the cost of traditional investments, and by linking advice to the portfolio algorithms, it promises to provide a very intuitive forward looking interface so that investors and financial advisers know what to expect.
Additionally, it helps financial advisors with their practice management by having an online on-boarding process with all documents stored on the cloud and automated reporting. The product set has just been extended to cover insurance as well.
“South Africa has a large savings industry with over R1 trillion under management, about R150 billion of new money entering every year,” says Shaun. However, the way financial advice has been given has changed for a long time and regulation means that advisers are burdened with regulation meaning they can spend less time helping investors. It also means that investors with a small amount to invest can’t get the best advice and portfolios as they don’t justify the paperwork and time needed to provide this service. Technology can solve all those issues.
Arcus Capital uses machine learning to trawl the stock market and create risk targeted portfolios. It has a front end website interface, fully adjustable for mobile, to display the analysis of the algorithms results in an intuitive way. All client information and FICA documents are stored in the cloud. The platform earns a small percentage on the money invested on the platform.
Arcus Capital does not provide loans.Its emphasis is to say people don’t save enough and they don’t even know how much they should be saving.
Someone might have, for example, a funeral policy that will take care of those arrangements but they won’t have enough money to put their kids through school for the next few years or someone might want to put down a deposit so they can buy their own house but they don’t know how much of their salary they should be saving, what to invest those savings into and how long it will take before they will be able to afford that new house (or holiday or whatever).
“We help people plan their financial future so they can achieve their goals. No defaults possible. All an investors money is ring fenced and protected so that only the investor can access their money,” concluded Shaun adding the firm is targeting to reach out to asset managers and insurance companies in SA to build its customer base.
Arcus Capital was part of the startups pitching at Seedstars World Jozi
to help raise capital and get the word out to financial advisers and investors that there is a new cheaper and better way to invest and help them achieve their financial goals. Shaun says startup capital in South Africa is difficult unlike Silicon Valley where one can raise funding and have a runway for a year or two.