Entrepreneur Derek Handley pitches his latest venture as a “bank alternative” option for those struggling to save for their first home.
He says it will let first-home buyers with $10,000 to tap services and rates usually only available to those with $1 million.
Aera, launching today, is offering a “target” 30-day savings rate of 6.45 per cent, with a target annual rate of 5.95 per cent if you keep rolling over your money each month. There’s also an overnight rate of 5.95 per cent.
Initially, at least, there will be no minimum deposit. You will need a “strong income”. Aera’s site uses the example of a couple with a combined income of $150,000.
Its “Deposit Accelerator” is not a savings account in the traditional sense. Aera is not a registered bank. Handley said it will earn higher returns (or, at least, target higher returns) than traditional savings accounts because it will put members’ money into corporate bonds, wholesale cash accounts and managed funds. He said these underlying assets would otherwise be too time-consuming to buy - or inaccessible at the most attractive rates - for first-home buyers.
The flip side is that the target rate for various Accelerator options is essentially a floating rate. It “may go up or down”, according to Aera’s explainer, depending on the performance of the underlying assets.
Members can also open a cheque account linked to a Visa card. The cheque account will allow bill payments through Aera’s app, and the Visa (issued by Visa NZ associate member Oxygen Global) will work with Paywave in the usual manner. The app supports Apple Pay and Google Pay.
And coming later this year will be an “Ownership Accelerator” account that gives a budding homeowner a stake in a house for as little as 2.5 per cent of its value, with the right to convert to full ownership, as they build toward a 20 per cent deposit.
More details of how exactly it will work will be revealed closer to launch. Handley said it will be aimed at high-income earners who fall into a gap - earning too much to qualify for Government incentives, but not being able to tap the “bank of mum dad” (our fifth-largest lender according to Consumer research).
“Aera is a financial services platform exclusive to first-home buyers,” Handley told the Herald.
“The Deposit Accelerator is essentially a savings product, with really great returns - to cut the time it takes a first-home buyer to save for their deposit.
“People might not know that if you have $1 million, you get the best rates and the best advice. If you have $10,000 you’ll get the worst rates and no advice.
“So what we’re doing is essentially piggybacking off the private wealth industry, which has access to these great returns and products - and we’re distributing them down to people who should be accessing them as well; the first-home savers.”
Handley and his older brother Geoffrey founded The Hyperfactory, a mobile marketing company sold to US media firm Meredith Corporation in 2010. More recently, he’s been a director of Sky TV, and the Government’s almost-Chief Technology Officer before it got cold feet on the role (which eventually morphed into a multi-person dog’s breakfast).
Last year, he raised $44 million from the billionaire Fukutake family and others for Aera’s venture capital fund, which has put money into Dawn Aerospace and other startups. Handley said the VC operation is separate. Funds for Aera’s new financial services platform will be held in a trust.
Handley said Aera would work with a range of custodian wealth managers.
While not being a registered bank would give Aera more freedom of movement, Handley also stressed that it is on the Government’s Financial Service Providers Register and part of the industry’s dispute resolution scheme under the New Zealand Financial Service Providers (Registration and Dispute Resolution) Act 2008.
Handley co-founded Aera with James Abbott, a former Westpac major client group manager who served as Laybuy’s chief operating officer up to the time of the buy-now, pay-later firm’s ASX listing.
Aera is backed by private capital firms Still (a Fukutake vehicle) and Icehouse Ventures, plus non-profits the Whakatupu Aotearoa Foundation and the Aera Foundation.
What does it mean his new financial services platform has “target” interest rates?
“Being a targeted return essentially means it is variable, floating, but each day the interest is credited at whatever the current rate is,” Handley said.
“However, if somebody makes a withdrawal request from their 30-day notice account, for the remaining 30-day period until their funds are returned, those funds will earn whatever the rate is at the date they make that request. Eg, in this case, the 6.45 per cent will pay out for those 30 days until their funds - principal and interest - are returned to them.”