Sam Stubbs won’t say whether Warehouse founder, Stephen Tindall, would soon stump up fresh capital for Simplicity as rumored last month.
But Simplicity will no doubt need a cash injection to fund the group’s empire-expanding ambitions this year.
“We’ve got an aggressive plan to move into other financial services markets now we have economies of scale in our core products,” Stubbs said.
Initially funded by two interest-free loans from Stubbs during the 2016/17 fiscal year amounting to $900,000, the rapidly-growing Simplicity has been “cash-flow positive for the last five months”, he said.
Nonetheless, Simplicity burned through about $430,000 in equity since launch in 2016 through to the end of March last year after generating about $1.4 million in fees during the two-year period.
And with a $300,000 loan repayment to Stubbs due at the end of March some Tindall money might come in handy. Although the most recent Simplicity accounts indicate the loan deadline would likely be extended.
“The 31 March 2018 financial statements have been prepared on a going concern basis, based on confirmation received from Arthur James Kay [Sam] Stubbs that the $300k loan facility will be renewed on the same terms and conditions as the existing facility, and that in addition, he will provide additional financial support to the Company should it be unable to fulfil it’s [sic] liabilities as they fall due through until 31 July 2019 (at a minimum),” the Simplicity annual report says.
According to Stubbs, Simplicity had garnered about $750 million in funds under management early in March – mostly in the group’s KiwiSaver scheme. As at the end of last year, the Simplicity investment funds offered outside KiwiSaver amounted to about $160 million.
(The group also reported about $210 million invested across the home-built NZ shares and bond funds, most of which is in-house money sourced from the Simplicity schemes. Simplicity invests in Vanguard funds to access global asset classes.)
Based on $750 million under management (charged at the sticker rate of 0.31 per cent) and securing an annual administration fee of $30 from each of the group’s approximately 22,000 members, Simplicity could pull in about $3 million in the current financial year.
But even gross income of $3 million won’t underwrite much of a campaign into other financial services sectors, especially in the face of rising expenses (about $1.4 million in the 2018 financial year).
Last month the NBR reported Tindall would stump up money both to fast-track loan repayments and fund growth. Stubbs said Simplicity was targeting a number of different areas including insurance, credit card comparisons and even core banking services like payments.
“It’s all up for grabs,” he said. “Where we see an industry that is gouging consumers and has indefensible margins we’re interested; if an industry is delivering true value already then we’re not interested.”
Whatever products Simplicity does eventually bring to market, however, would be suited to online delivery – and have a track record offshore.
“We don’t have any new ideas,” Stubbs said. “We’re just looking to bring to NZ the best ideas that already work overseas.”
In the meantime, he said Simplicity is continuing to develop its robo-advice system – built on Google artificial intelligence technology– for a release to the wider market.
“It will be open architecture and product agnostic,” Stubbs said.
The robo-advice system was about 80 per cent complete, he said, but there was no release date set. Simplicity hasn’t applied for a robo-advice exemption from the Financial Markets Authority suggesting a launch after the new advisory regime comes into effect.
Robo-advice will be permitted without the need for a FMA exemption once the Financial Services Legislation Amendment Bill (FSLAB) passes into law – expected in the next month or two.
Stubbs said the Simplicity robo-adviser would target the mass market rather than those with more complex needs who tend to deal with human financial advisers.
“We’re not interested in replacing face-to-face financial advice,” he said. “This will be complementary.”
Tindall will reportedly tip funds into Simplicity via his K One W One charity vehicle. Simplicity is fully-owned by a charitable trust.