Dear fellow Easy investor
There has been an overwhelming response to our proposed launch of securities lending. Most of it fairly targeted at the simple fact that we could have done a better job of handling the communications and allowing you to opt-in rather than out.
Those of you that know me and have lived alongside EasyEquities for a while, know that its not in our DNA to do anything that isn’t in the best interest of our clients’ march towards financial freedom. However, you will also know that when we get things wrong, we listen, learn, pivot and return stronger.
The same is true of securities lending. So while we are cancelling the launch of securities lending for now, expect it back in your inbox when my team and I are 100% happy that we have done the best job at alleviating your concerns and making the entire experience easier.
Just a little insight from me into why we were so excited about the launch and why then, in the result, rushed it.
Securities lending is the reserve of the very wealthy and has never been made available to retail clients on this large scale. If you do it properly, it’s a great way to extract more value out of your portfolio without increasing the risk.
In this regard, we spent over a year negotiating and contracting the best possible outcome for our clients both in terms of balancing the risk and returns and in the result, created the same resilience in our contracts that your pension funds rely on.
All the revenue flowing from the securities lending would have been split 20% to the institutional partner, who essentially lends out the securities and manages the risk and return, 48% to EE clients for their stock and 32% to EasyEquities for managing the tech and platform on which the securities lending runs.
A well-diversified portfolio of listed securities would earn around 0.70% a year from securities lending income. With this in mind and the fact that we are limiting the lending to 60% of your portfolio, the total revenue from securities lending would be on average 0.42% (0.7% x 60%). Of that, clients would therefore earn an extra 0.20% (0.42% x 48%) on their portfolio per year.
Out of interest, that’s roughly 30% of what our clients are spending on transaction fees a year. So, in essence, your costs would be reduced by 30%. Reducing costs is the only certain return you’ll ever get from investing and that’s why this was such a big deal for us, a way to reduce your costs by increasing your income and effectively guaranteeing a greater future return.
However, securities lending is a complex part of the financial system and we haven’t done a good enough job of explaining it all - my sincere apologies.
It's back to the drawing board and if securities lending is still something you don’t want once we’ve done a better job of explaining it, then you have my assurance that we will not launch it - its really that easy!
Regards and thank you for your incredible engagement today. My team and I remain committed to setting our hundreds of thousands of clients as you all continue on your financial journeys.