Perfect time for EasyEquities to introduce a platform fee

The debacle over the planned R25 per month mandatory Thrive subscription provides EasyEquities with a perfect opportunity to introduce a 0.5% annual platform fee.

On 1 November, EasyEquities surprised users by making its Thrive loyalty program mandatory and linking a R25 per month fee to it.

Those younger than 21, older than 65, or who have reached Thrive level 3 will be exempt from the R25 per month fee.

The announcement was slated by EasyEquities users, with many threatening to ditch the platform in protest.

EasyEquities’ attempts to convince users that the mandatory Thrive subscription was introduced to help them fell flat.

Users do not want it, and they were not consulted before it was announced. Many stakeholders also don’t buy the story that EasyEquities’ does not “want people to pay”.

Well-known investor Karin Richards described EasyEquities’s new R25 per month Thrive fee as disingenuous.

“I would hate to be treated like a child in this manner. ‘Reward good behaviour’ – what a load of drivel. Just say: we need to charge a fee. End of story,” she said.

The truth is that EasyEquities and its owner, Purple Group, are under pressure to improve earnings. Its share price has plummeted 78% since January 2022 due to lacklustre finances.

Its results for the six months ended 28 February 2023 revealed that its operating expenses increased significantly faster than its revenue.

The standout figure was a net loss of R10.6 million – a negative swing from the previous net profit of R17.7 million. It was a 158% deterioration in Purple Group earnings.

EasyEquities relies heavily on user activity to generate revenue, which is why it is now trying to convince people to increase their activity through Thrive.

However, the R25 per month mandatory Thrive subscription, described by Purple Group CEO Charles Savage as a ‘stick approach’, is complicated and disingenuous.

Another problem is that the flat fee disproportionately hurts smaller investors who do not have much money in their accounts.

A more progressive approach will be to introduce a 0.5% platform fee. Other platforms like SatrixNOW already use it, and it will not hurt smaller investors.

One can appreciate that EasyEquities is reluctant to introduce a platform fee. It has always promoted itself as an affordable way to invest, with no minimums and no platform fees.

However, users will not differentiate between a mandatory Thrive fee and a platform fee. It is the same thing for them, after all.

If EasyEquities wants to maintain its current messaging, it can still reward users who achieve Thrive level 3 by removing the platform fee for them.

The finances also make sense. With 850,000 active investors, the R25 monthly charge will generate R255 million if everyone pays.

A 0.5% platform fee will generate R210 million in revenue based on R42 million in customer equity.

EasyEquites has built an excellent investment platform and continues to invest millions to enhance it and offer more options.

It is normal for a business model to change as the platform matures. EasyEquities is a perfect example – it is far more advanced than when it was launched nine years ago.

Users may moan and groan initially, but with an option to avoid fees, if they reach Thrive level 3, it will quickly die down.

It still offers a great way to invest and will remain one of the cheapest options in the market. It is highly unlikely that there will be a mass migration of accounts.

The additional revenue will enhance the business, create more funds to enhance the platform and make shareholders happy.

EasyEquities has been provided with a great opportunity to introduce a platform fee. It has taken the pain already and now only stands to benefit.