Millennials, the first generation to grow up with the internet and born after 1980 are disruptive and rely on technology to shop, listen to music, communicate with friends and hail a cab, now they take personal investing advice from robots.
From social media to Amazon, Spotify, Uber, and Kolobox, millennials have transited, in the words of Bill Gates from electricity-based to an internet-based lifestyle. Gates had in his book “Business at the Speed of Thought” argued that it took humanity long to build a civilisation around electricity. Now, with the internet and World Wide Web, the world has entered into a new mode – web-based civilisation.
Financial Technology (fintech) companies are taking advantage of these traits to disrupt the personal investing industry.
“Just as manufacturing companies have replaced assembly line workers with robots, these companies have replaced financial advisors with robo-advisors, which use big data and algorithms to determine the best places to put clients’ money—and appeal to a whole new generation of investors” Michael Blanding, a columnist at the Harvard Business School Working Knowledge wrote in an article titled “Why Millennials Flock to Fintech for Personal Investing”.
Blanding said traditional financial advisors cater to baby boomers with substantial savings, requiring minimum amounts for investment upwards of $100,000 to access their services. By contrast, industry-leading Wealthfront and similar firms such as Betterment, Vanguard Personal Advisor and Acorns have tapped into an underserved market by allowing clients to invest as little as $5,000. Wealthfront doesn’t even charge a fee for assets of less than $10,000—and even after that charges a 0.25 percent fee, as opposed to fees of 2 to 3 percent by traditional firms.
In Nigeria, Kolobox has also presented products to cater to this underserved market. The micro-investment platform aggregates fund from customers pulls it together and because of the joint might, it is able to negotiate for higher returns on investment. Everyone in the pool gets the same rate of return on their investment, irrespective of the amount invested.
“We put our funds in Treasury bills, usually products that are backed by the Federal Government. Kolobox, among our competitors, is the only one that is regulated by the Securities and Exchange Commission. Your funds are guaranteed and insured. We do not give our funds to microlenders where the risk of loss of funds is high” he added.
The platform has a number of products, where you can lock in your funds. It also has others where your funds are not locked. Locked options give higher returns naturally. Kolobox has partnered with Radix Capital, which has been around for the last 15 years and done almost all the Lagos State bonds. They are one of the key investment banks in Lagos. They are SEC regulated and before any product is brought to the market it has to be approved by the Commission.
One new feature on the platform is group investing. This allows an individual to invite family, friends, and colleagues, making investing more fun. This can help people set short medium and long term goals, a family may want to save towards their mother’s 80th year birthday or for a marriage. Saving together then serves as motivation. Kolobox was launched in July 2018.