Selfwealth (ASX:SWF): Interview with CEO Cath Whitaker

We spoke with Selfwealth CEO Cath Whitaker about the massive growth in active traders on the SelfWealth platform, helped by traders leaving CommSec, ANZ and NAB. We also spoke about the new products and services that Cath and her team are introducing in the near-term.

See full transcription below.

 

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Transcription

 

Stuart: Hello, and welcome to Stocks Down Under. My name is Stuart Roberts. I’m one of the co-founders of our firm. It’s Tuesday, the 14th of September, 2021, and I’m meeting with Cath Whitaker, who since March has been the CEO of Selfwealth, ASX: SWF. Cath, thanks for joining us at “Stocks Down Under.”

Cath: Thanks very much for having me, Stuart.

Stuart: Now, it’s fair to say that Selfwealth is not a slow-growth company. A year ago, you had about 46,000 active traders on the Selfwealth platform. You just crossed the hundred-thousandth mark on August the 10th. And my suspicion is that there’s a few more quarters of growth where the last few have come from. Where are all these active traders coming from?

Cath: Yeah. And thank you. We certainly are a high-growth company. And as you’ve pointed out, you know, that growth in terms of active traders, you know, we’re very grateful for that, and we’re acknowledged that that growth comes from a couple of different areas. Firstly, in the last 18 months, the number of retail investors has doubled. You know, it’s gone from 700,000 to now over 1.4 million in Australia. So, you know, Selfwealth has attracted a number of first-time new investors. But we actually think the majority of our growth is actually coming from people who are switching from other platforms, and namely, the big four banks. As, you know, those people are looking to say, “Okay. Well, you know, I would like to buy my Australian equities online. I wanna do so in a safe and secure platform. But I’m not willing to pay, you know, fees, $20, $30, to do an equity trade that you can do on Selfwealth for $9.50.” So we’re hugely encouraged that those people are coming across from the big four banks.

Stuart: Right. And I have a suspicion, it’s not just the price that’s attractive. I mean, we all like a lower-cost offering, but we like to get value for our money. And you’ve been investing heavily in new content for the benefit of those 100,000 active traders. Talk to us about some of the initiatives that you are working on at Selfwealth.

Cath: Absolutely, right, Stuart. So, you know, we are a low-cost, high-volume platform. And, you know, what we’ve worked really, really hard at is listening to our clients in terms of what they’re looking for, not just in relation to equities trading, but in relation to wealth creation. And so following on, you know, we’ve invested in making sure that we are independent, we provide functionality such as instant deposits, making it available for people to transfer funds into their accounts instantaneously…

Stuart: Like not the usual three-day wait the other platforms make you endure.

Cath: Absolutely, absolutely. You know, we know people…it’s their money. They want their money transferred at that point of time and ready to invest in the equities that they have decided upon. We’ve also invested heavily into live pricing and making that available for all of our members. So no subscription fee is necessary for that. You’ve got that live pricing information at your fingertips. We’ve also been investing in making sure that people have access to not only the Australian equities market but the U.S. equities market as well. So we’re hugely proud that we launched that in December 2020. The uptake of that has been, you know, so pleasing to see. You know, we now have over 32,000 of our 100,000 active traders utilizing U.S. equities. And we have a whole roadmap planned in the next 12 to 18 months, where we plan to bring more and more new features and functionalities onto the platform for all of our active traders to enjoy.

Stuart: Right. So there will come a time when you, as competitive, say CMC, in terms of the access to all the markets that anyone could ever wanna trade from right here in Australia?

Cath: Absolutely. And so what we have done is we have looked at the platforms of the big four. The big four still holds 70% of the market share in Australia. And, you know, we believe that we are already almost at parity with the big four in terms of the functionality. We certainly have some more work to do yet to make sure that we are at parity with all of the features and functionality. But that’s certainly where we’re heading. And, of course, we’re not gonna stop there. You know, we know that this can be done a lot better. We’re looking at all sorts of, you know, removing the friction point, you know, in terms of reporting, visualizations. And something that’s really near and dear to my heart is to make sure that people have the right knowledge and information and content at their fingertips, and that is provided to them knowing that, you know, it is independent in nature. And so, you know, we’re really pleased, you know, with the progress that…

Stuart: We’re talking Selfwealth, not “Stocks Down Under,” Cath.

Cath: Well, there’s the big frame of “Stocks Down Under” as well, Stuart. So…

Robert: Right.

Cath: …yes.

Stuart: Yeah. But to your point, investors don’t just wanna trade. They wanna be able to research good ideas. And one of the things you’ll be doing with the 12 million you recently raised at… I think was 39 for the placement, 35 for the right issue, is investing in new content for the benefit of those 100,000 folks.

Cath: Absolutely. You know, we think it’s a circular benefit. You know, something that Selfwealth has always done from the very start is, you know, we don’t wanna be influenced by other people’s agendas. We wanna make sure that we go out there, we get the right information, that it’s accurate, that it’s up to date, to have a breadth of view so that people can, you know, do their own planning around their own wealth creation and management. And, you know, we take great pride in making sure that that content is available to those people when they need it.

Stuart: Right. Now you joined Selfwealth in March, and your previous port of call was head of digital transformation at Marsh, which is the big New York-based…I think it’s New York-based insurance broker, in fact, I think the biggest insurance broker in the world. That’s a bit of a sidestep for you in terms of the kinda career path you’ve been on before you joined this company, would you agree?

Cath: Yes and no. So, you know, it certainly was. That I was a tremendous role heading up digital transformation globally across 70,000 people and over 70 countries. But what I would say is that my broking experience within insurance has certainly put me in good start in terms of from a strategic perspective of equities breaking. I think the other thing that’s really important is that, you know, I was always responsible for a go-to-market strategy. So, which means listening to client needs, making sure that the product that’s being developed is fit for purpose, working within the regulatory framework, making sure it’s profitable. And, you know, the most important thing is making sure that that product is valued. And that is something that, you know, I have a very long track record of, you know, but a lot of experience in terms of building out technology capability. And for anyone who has worked with me for any period of time, they will tell you pretty quickly that I am a self-confessed data nerd as well. And I think that’s something that I bring to this role as well within Selfwealth. As we’re building out our go-forward strategy, we’re making sure that one of our key cornerstones is within data and analytics, both in terms of making sure we understand what our clients need, making sure that we, as an organization, continue to deliver the business growth that our shareholders deserve as well. And so, you know, that strategy is working very well for us. And, you know, we’re seeing the results come through in terms of increased market share.

Stuart: Certainly. Now, financially, FY21 was fantastic for you. You pretty much tripled your revenue base to about $18 million, almost break even at the EBITDA line. But if I know Selfwealth, it might be well before we actually move into the black on the EBITDA line like a lot of great growth companies, such as Amazon, which took years to make a profit. You’re investing heavily in your growth, and FY22 is no exception. What’s going to be the biggest line item in that budget that you’ll be pressing the button on FY22?

Cath: Yes. So, you know, we have a very clear-cut strategy. So, you know, number one, it is to grow. Growth will come through, you know, more active traders coming onto the platform. We’re very focused in making sure that we improve the user experience for that client base as well. And we’re also introducing a number of new asset types, you know, one of them being crypto and being able to trade crypto online on the platform. You know, our progress toward that is going very well. We’ve said from the very start that it is our intent to introduce crypto in a very Selfwealth way, which means that, you know, offering five coins only, working with a reputable crypto exchange based in Australia, making sure that people are aware of the risks associated with crypto trading, and thinking very seriously about some of the custodial concerns that come with crypto. So we’re very excited by that. We’re also introducing a new international market by Christmas time as well. Again, these decisions are not taken in isolation in terms of what country we believe should be the next market. This comes out of a great deal of research that we do with our client base, and also where we see the most significant growth happening in equities markets across the globe.

Stuart: Sure. Now, one final question. I’m sure you get this often. You’re not the only platform in town with a relatively low offering. And, obviously, Superhero is about half where you are in terms of their trade. Now, I’ve seen a lot more billboards lately here in Sydney. Tell me about Superhero compared to yourself. What’s your competitive advantage in that space?

Cath: Yeah, so we anticipate there being a number of new competitors coming into the market, and that comes out of the fact of the addressable market has doubled. And, you know, that’s just within equities trading alone, and we anticipate a lot more growth happening within wealth creation and DIYs. But, you know, what I would say to that is look, whoever the newcomer is, whether they’re offering $0, $3, $5 brokerage, what Selfwealth will always hold itself true to is that we have a secure platform. You know, Selfwealth is here for decades, not days. We have already shown our commitment to producing high-quality platform experience. And so, you know, we’ve talked today about, you know, our strong desire and intent to continue the investment on education and content as well. So we feel really well-positioned to continue that growth trajectory, you know, whilst looking at the newcomers that they come in and, of course, you know, Selfwealth is an ASX listed company. So, you know, our financial transparency is undisputed.

Stuart: Right.

Cath: So, you know, we welcome, you know, retail investors to due diligence that we hope that they’ll do before choosing any platform. It is their money, you know. So please be aware of where and how your money will be held. And, you know, we know that retail investors will be smart enough to figure out that to put their money in a platform, you know, where it is gonna financially stable.

Stuart: Yeah. Well, Cath, well done on what you have achieved in the relatively short time you’ve been there, and well done to the rest of the team. It’s turning out to be a very competitive platform growing quite strongly. Market’s finally waking up to the fact that Selfwealth is turning to a valuable enterprise. So keep up the good work.

Cath: Thanks very much, Stuart. Appreciate being on today.