Raiz funds swell to $2.4b riding young investor wave

Australian fintech player Raiz Invest has continued to build its investment empire one small deposit at a time, growing funds under management by 20.2 per cent to $2.4 billion in the September quarter as a new generation of investors embraced its digital wealth platform.

The company added $69 million in net customer inflows during the three months to September 30, a 27.8 per cent jump on the previous quarter, while its active customer base grew 5.6 per cent year-on-year to 354,202.

Notably, annualised revenue per user climbed 2.9 per cent $86.69 providing scope for fatter gross profit margins as Raiz squeezes more income from its growing customer base without necessarily adding to its operating costs.

However, the real story behind the numbers is not simply how many Australians are signing up. It is how much they are investing once they get there.

‘The underlying Raiz business remains solid, with a significant retail customer base skewing towards the younger investor demographic.’

Raiz Invest chief executive officer Craig Keary

The average Raiz account balance has climbed 13.8 per cent over the past year to $6776, suggesting customers are gradually building bigger investment portfolios rather than simply parking a few dollars of spare change.

The encouraging growth in account balances suggests increasing investor confidence in a business that pioneered Australia’s round-up investing model, allowing customers to turn loose change from everyday purchases into steadily growing investment portfolios.

What began as a relatively simple way to introduce Australians to investing has evolved into a broader wealth management platform - an approach that has proved particularly appealing to younger Australians looking to dip their toes into the world of financial market investing without needing a hefty starting balance.

The number of children invested in its Raiz Kids portfolios jumped almost 25 per cent over the past year to 73,957, while the money invested in them surged 42.7 per cent to $132.3 million.

The company says these figures point to growing enthusiasm among parents and grandparents keen to give the next generation an early financial head start.

Raiz is also finding traction among first-time investors through its entry-level Lite offering, which has grown to more than 10,000 portfolios, up 17.7 per cent in just three months, reinforcing the platform’s appeal to first-time investors.

Importantly, the company’s appeal is extending beyond those taking their first tentative steps into the market.

Its superannuation offering now manages more than half a billion dollars, while its Plus portfolios, which offer customers greater investment flexibility, have attracted $441.3 million showing customers are also embracing more sophisticated investment options as their financial circumstances evolve.

Meanwhile, the company’s Jars portfolios, which allow customers to organise investments around different financial goals, also recorded strong growth climbing 67.2 per cent year-on-year to 46,729.

Raiz Invest chief executive officer Craig Keary said: “The underlying Raiz business remains solid, with a significant retail customer base skewing towards the younger investor demographic, and a steady stream of recurring net flows onto the platform.”

The growth comes as Raiz, now under the stewardship of chief executive Craig Keary, pushes ahead with an August-launched overhaul aimed at winning more customers, tightening operations and broadening its wealth management ambitions.

The program includes plans to harness artificial intelligence for customer engagement, refresh the company’s market positioning and explore potential strategic acquisitions.

Despite one-off costs of $500,000 associated with the transformation plan, the company finished September holding $15 million in cash, up 3.4 per cent from the end of June.

However, the overhaul has also uncovered historical tax compliance issues, with the board and management pressing ahead with an external review and ongoing discussions with regulators. The company says it will keep the market updated as the process unfolds.

Looking ahead, Raiz is progressing plans to introduce access to US-listed shares and exchange-traded funds, with direct ASX share trading earmarked to follow.

For a business built on turning everyday loose change into investments, the latest numbers suggest those small contributions are adding up.

With younger investors joining the platform and existing customers steadily growing their balances, Raiz has a sizeable customer base to build on as its management team tackles the next stage of its transformation.

Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au