Insufficient investment and retirement products that cater for the lower end of the market are reducing opportunities for consumers to save, invest and change their lives, says passive investment platform Itransact’s Retail Distribution and Business Development director Lance Solms.

“Two key barriers prevent low-end consumers from effectively investing and saving for retirement: the high cost of most actively managed investment products that wipe out most of the gains of small-scale investors, and the lack of access to investment platforms and products,” he explains.

Itransact is selling its passive investment products, mainly exchange traded funds (ETFs) and portfolios of ETFs linked to various JSE indices, through financial advisors, but aims to extend its reach to all types of investors through mobile applications (apps).

Smartphone and tablet apps can provide a rich, detailed and real-time experience for individual investors, but these services cannot effectively be provided for feature phones.

Solms says a significant barrier to getting lower- earning consumers to invest in such products is the lack of ability to get them to take all the legal steps electronically and Itransact firmly believes that paper-based requirements will have to make way for secure digital processes and records.

Legislation is lagging significantly to allow for the use of technology channels (like apps) to liaise with clients, and sell them products and services more efficiently.

Real-time channels will also be highly effective at keeping investors informed about their investments, and can provide basic analytical tools for users to view expected returns and the impact of withdrawing funds on future returns, providing visual information to incentivise savings.

As long as fees and costs are kept low and products are easily accessible, passive investment products can enable low-end consumers to save money and fulfil their long-term economic goals, says Solms.

“The average total expense ratio of active investments is about 1.5% a year, which at 10% average rate of return a year means that investors are actually paying 15% of their return in fees, compared with the average passive product expense ratio of 0.30%, translating to investors keeping more of their returns.

“Keeping investment costs low is crucial for improving chances of better returns for small-scale and individual investors. Our goal is to always provide passive investment products to investors at the lowest possible cost.” Material Returns Even a small amount of money invested each month can provide a person with material returns over the long term, and every individual should have the opportunity to save for their future, emphasises Solms. If the investment industry can provide sufficient access to digital channels, then real-time services can be offered to investors, such as the ability to deposit surplus money into their accounts at any time over and above their monthly contributions. The ability for investors to monitor and engage with their investments in real time will also help to increase awareness and should encourage savings, he adds. The company is also investigating how to provide products and services through technology channels to collective savings schemes, such as stokvels, which would improve the security of these savings schemes and provide members with up to date investment information relating to their specific share of the scheme.