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The App Providing Fixed Income Exposure for Everyone
29 Plays3 years ago
This week, AFI virtually meets with Gaby Rosenberg who is the Co-Founder of Blossom. Blossom is a fintech helping to provide fixed income exposure to the mass market and targets a 3% per annum return. We dive into the investment strategy of the product and ask all the questions you might have such as liquidity, fees and movement in rates. Gaby also provides a sneak peek into how she went about starting her own business and what her day to day looks like. You can find more about Blossom on their website: www.blossomapp.com. The Alpha Females Invest is a financial podcast for those who want to elevate their investing knowledge. We host a series of experts to navigate a technical deep dive into their field of expertise. We aim to promote gender diversity by having at least an equal representation of female guests on our show. Thank you for listening and supporting The Alpha Females Invest. Disclaimer: The views expressed in this podcast are those of the speaker. The content is not financial advice. You should seek the assistance of a professional who can take your personal circumstances into account prior to making any investment decision. The awesome tunes are courtesy of @tmykmusic
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Transcript
Introduction to Female Voices in Finance
00:00:03
Speaker
Welcome back to the Alpha Females in Best podcast. Two females working in the finance industry searching for alpha. My name's Emily. And my name is Clooney. And together we bring diversified perspectives from the buy and sell side of the finance world. One of the aims of this podcast is to help elevate female voices in the finance industry to promote gender diversity.
Meet Gabby Rosenberg of Blossom
00:00:23
Speaker
And we are super excited to be interviewing a female in finance, but also a bit of technology there as well, Gabby Rosenberg from Blossom app.
00:00:32
Speaker
How exciting, Gabby, we're super excited to talk to you today. So just before we do get into the crux of our podcast today, every week, as you guys have worked out, we do like to ask our guests the most embarrassing career moment. So last week I shared mine, but this week, Em, I think it's your turn. So can you share one with us, please? Sure. I definitely have a few up my sleeve, but I'll share one quick one, which is actually mortifying. I was a graduate at the time at a global investment bank.
00:01:00
Speaker
And because I worked quite long hours, I didn't get to see my partner very much. So we used to text pretty much the entire day. My manager had gone home for the night and I was texting my partner and I sent him a message. Hey, babe, how are you going? You know, I miss you, love you, blah, blah, blah. And it wasn't for about five minutes that I realized that I actually sent it to my manager instead of my partner.
00:01:29
Speaker
I was just so modified because I was like, firstly, is he going to think I'm hitting on him? Secondly, is his wife going to see this? Am I going to get in trouble? So I quickly, oh my gosh, so sorry, wasn't meant for you. So we moved on and it was never mentioned again, but he's never brought it up to this day and I still keep in contact with him. Luckily, it didn't ruin our relationship. Lucky it didn't ruin your career. Well, that's exactly right. Hopefully, it still doesn't.
Financial Advice Disclaimer
00:01:58
Speaker
So as usual, any information discussed in this podcast is not financial advice and all opinions reflect those of the individuals. You should, of course, always read the PDS and talk to a financial advisor who can consider your personal circumstances before you invest in any product.
Gabby's Journey and Blossom's Mission
00:02:14
Speaker
So today, as we mentioned, we've got Gabby, who is the co-founder of Blossom, the new majority female-owned savings app targeting 3% per annum return to help you reach your saving goals. Gabby Rosenberg's experience crosses customer service and supplier management in double-sided marketplaces, both early-stage startups and global leaders.
00:02:37
Speaker
At a company called Dingo, a car repair marketplace, Gabby grew the supplier network from just 70 repairs in Sydney to over 400 repairs nationally. She received a Woman in Collision Industry Award for her efforts. And that's just a start of it. Given her passion for helping others reach financial freedom, Gabby is motivated and ready to level the playing field in the fixed income market and help Australians do more with their savings.
00:03:03
Speaker
She has the mission to leave your savings and the environment better than she found them all. And as such, we'll be planting trees in Aussie's bushfire affected regions when you fund your account for the very first time. Gabby is injecting more female energy into the FinTech space and we're so excited to have you on the podcast today.
Wardrobe Malfunction Anecdote
00:03:21
Speaker
So Gabby, as we just heard Em's most embarrassing career moment, could we kick it off with yours? I'm sure it's definitely not as embarrassing as Em's.
00:03:30
Speaker
I think mine is equally as embarrassing, if not more. I used to have to do a lot of travel for work in my previous role at Dingo and it was a sales role. So I'd go from client to client selling the product and it's a lot of solo travel as well. And I was getting into the car one time
00:03:48
Speaker
And I tripped when I got in, but I didn't think anything of it. And I carried on with my day seeming that everything was fine. And after about five one-on-one meetings, I was walking past a shop front and got a bit of a glimpse of myself in the mirror.
00:04:03
Speaker
And I saw this weird thing on the back of my pants and I was like, what's going on there? And so I turned around to look in the reflection and I actually had ripped the entire back of my jeans off. And giant, giant rip. I'm not exaggerating.
00:04:19
Speaker
And I didn't know what to do, so I ran back to the car, I called my sister straight away, I sent her a photo, and we honestly laughed uncontrollably for 20 minutes. I think I had seen five different vendors that day. No one said anything, and just thinking about it today makes me want to die. Wow, that is an honest policy.
00:04:41
Speaker
You won that round. That's a great story. Disaster. Absolute disaster. Maybe we should have the best, most embarrassing career moment in and we'll rank everyone. That's pretty powerful. I think this is a winner, except for actually cloning yours was pretty bad, I have to say.
00:05:00
Speaker
Great. Well, thank you so much for showing that, Gabby. That was hilarious.
Overview of Blossom App
00:05:03
Speaker
Congratulations on creating Blossom. It is so refreshing to see young, entrepreneurial, female start a business and one that has such a great purpose as well. Can you tell us what it is and how you came about starting it?
00:05:18
Speaker
So Blossom is a new savings app that targets a 3% return per annum. And as we know, there are very few options for millennials to do more with their money at the moment. On the one hand, you can leave it in the bank making near zero interest rates. And on the other end of the spectrum, you have a super volatile market due to the global uncertainty caused by the pandemic. So our mission with Blossom is to democratize the fixed income market.
00:05:43
Speaker
And it's something that we see as a middle ground between these two options. So how we've done that is we've created a super easy to use app, and we've tied it around the Blossom Fund, which is actually a fixed income fund. And further to that, we're removing as many restrictions as we possibly can that have now become commonplace within the fixed income market. So there's no minimums, you can get started with $1 if you want to.
00:06:08
Speaker
We have no sign-up transfer and withdrawal fees and because we're app-based it's super easy to get started in approximately three minutes. We have a feminine brand and ESG focus and as you mentioned at the start we're planting trees in bushfire affected regions when you fund your account for the first time.
00:06:27
Speaker
Wow, I think a lot of those attributes are pretty mission critical. And it's really interesting to hear you just talking about, which we'll touch on later, but about low startup amounts and all that type of stuff, which was what we previously spoke about with one of our prior guests on the fixed income market. So I definitely want to explore that later.
The Inspiration Behind 'Blossom'
00:06:44
Speaker
But just quickly, obviously here at the Alpha Females, we have a pretty striking name. Can I ask what is behind the name Blossom?
00:06:52
Speaker
My late grandfather's nickname was Blossom. It's something that his mom used to call him. And much like he used to bring the entire family together, Blossom has done the exact same. So it's a huge family effort. Everyone helps where they can.
00:07:08
Speaker
My twin sister is a psychologist, so we have her proofreading emails and helping us with Instagram content. My older sister is a teacher, so she's helping us break down very technical financial concepts and cater to a new demographic of millennials for the first time. So everyone contributes where they can, and I think my grandpa would have been super proud of that.
00:07:28
Speaker
Oh, that's so nice. I love that. A name with meaning and purposes and a business with purpose as well.
Blossom's Financial Strategy Explained
00:07:36
Speaker
So 3% was your return goal. So how did you come about determining that as a target and what factors did you put into coming up with the 3% per annum? So the factors we needed to take into account a whole host of factors in this sense. So we take into account what we think the fund can make in a given year.
00:07:59
Speaker
and work backwards to ensure that we're able to pass as much of that off to the customer as we possibly can. We then need to take into account the external fees that we need to pay, how much we think it's going to take to run the business. And that all culminated in comfortably targeting a 3% per annum return. And we have a high degree of confidence that we'll be able to achieve this return, given that we're passing the first 3% on to the customer first.
00:08:27
Speaker
Gabby, is that after or before fees, that target, when you just mentioned that includes costs? It's 3% targeted returns after fees. We have a bit of a novel structure in how we pay out our fees and we pay it out in a waterfall style. The first 3% per annum available always goes to the customer.
00:08:48
Speaker
then we pay our 1% in external fees. So 0.5 of that, the next available goes to our liquidity manager and the next 0.5 goes to our responsible entity. And then the rest, so 3% after 1% is kept by Blossom, one to help us run the business, but also it allows us to build a buffer and it helps us to continue to target those 3% per annum returns in the long-term.
00:09:14
Speaker
Yeah, that makes sense. And obviously, if you look at the bank's interest rates at the moment, I mean, you're barely getting anything, if anything, usually for a transaction account, you actually have to pay the bank. So you're getting negative returns. So 3% does seem solid. But there is a lot of discussion in the market about, you know, we're at a very low interest rate cycle. It's likely that at some point in time, the RBA is going to raise rates and interest rates are going to increase at the yield curve.
00:09:43
Speaker
Is your 3% target an absolute? Would you consider moving to, you know, an RBA plus X percent return, or is the 3% going to be the long-term fee target? So at this current interest rate, it's 3%
Comparing Blossom and ETFs
00:09:58
Speaker
target, but because it's floating, if interest rates go up, it doesn't actually affect the values. So it can help to increase the running yield if the RBA rates are increased.
00:10:11
Speaker
Okay. Great. That's really interesting. So as I just mentioned, Gabby, we did speak to Brad Dunn from Daintree Capital last week, a lot about fixed income. And basically one of the key things he sort of mentioned was the minimum amount for a direct bond investment can be roughly 200,000, which obviously makes it pretty unachievable for the average punter. Especially, you know, I know I wouldn't be putting 200 grand into the fixed income market off a whim.
00:10:36
Speaker
So I know you touched on it just before briefly, but can you explain how does Blossom actually break down that barrier to give access to everyone? And what is the difference, I guess, between using Blossom and then a fixed income in the earth?
00:10:50
Speaker
So Blossom's mission first and foremost is to democratize the fixed income market and bring it to a new demographic, which is millennials. And exactly as you said, I don't have $200,000 to drop into a bond portfolio investment either. It's just totally out of our league. And so it is a market that's typically reserved for institutions or high net worth individuals.
00:11:11
Speaker
due to these high minimum investments, high fees, long lockup periods. So we want to democratize this space for the everyday millennial and really cater it to everyone, even if they only have $1 as their initial investment to spend. So that's the first thing. And in terms of blossom versus a fixed income ETF, why we're different is because we have tried to remove these barriers. So no sign up, transfer, withdrawal fees,
00:11:36
Speaker
and also instant access to information through the app. And we're also posting earnings daily. And I guess you might be used to an institution that maybe pays quarterly or monthly. So with a fixed income ETF specifically, while the underlying investment is similar,
00:11:54
Speaker
these fixed income ETFs are still listed securities on the stock market, where investors are buying and selling units to each other, and it's lending itself to the stock market volatility that Blossom isn't subject to as an unlisted managed investment scheme. So we've also further attempted to reduce this volatility by targeting a fixed rate of return at 3% per annum. Further to that, so listed fixed income funds can also trade at a discount or a premium,
00:12:23
Speaker
what they're actually worth and often they're not fairly valued as what the underlying investments are worth. And then just the last point that I'd add to that is, yes, we're providing access to the Blossom fund, but we also have the Blossom app and it's super easy to use. It's a one-stop shop for saving an investment because we have
00:12:42
Speaker
very cool in-app functionality whereby you can set a savings goal, there's add-ons and it just makes the task of saving and investing a little bit more convenient and rewarding than what we're currently used to and what's out there. Yeah, that's great. I actually did download the app and it was very user-friendly. And you bring up a good point on ETFs versus leaks and trading in a premium discount to Nav. And that's something we definitely want to dive into on another topic.
00:13:09
Speaker
But you've reached a really important goal.
Blossom's Customer Base
00:13:12
Speaker
You haven't been in market for that long and you're already at 6 million of funds under management, which I think is pretty cool. And we were wondering, there's obviously some investments that you've made so far. What are some of the companies that are in the portfolio at the moment? So at a very high level, the Blossom Fund invests in cash, NCDs, mortgage-backed securities, semi-government and government bonds and financial bonds as well.
00:13:38
Speaker
And an example of what we're invested in would be a New South Wales government bond.
00:13:43
Speaker
And further to that, we have very much an ESG focus of the fund. So some of the exclusions include avoiding investments in oil, coal, gas, tobacco, prohibited weapons. And we actually work very closely with our ESG expert and her name is Dr. Kylianne Richards. And she is huge in the research world of ESG as well. So she's a lecturer at the University of Technology, Sydney in
00:14:09
Speaker
green finance, ethical investing, sustainable investing. So using her, we're actually able to couple her real life experience both domestically and internationally with her academic affiliation and research. So it's just making sure that all investments made in the fund are ethical, purposeful, and we are trying to fulfill the mission to leave your savings in the environment better than we found them.
00:14:34
Speaker
So given those constraints, Gabby, and I guess given the flexibility that Blossom offers to consumers in terms of being able to take their funds in and out at much more fast pace than the average institutional client, how do you ensure you do have enough liquidity in the portfolio for withdrawals and drawdowns? And I guess you mentioned cash before, is that a high percentage of the portfolio? So cash is about 1%.
00:15:00
Speaker
and how we manage the liquidity and ensuring there's enough in terms of withdrawals and drawdowns. We keep a percentage of all funds under management for liquidity purposes to make sure we're making withdrawals easy because that's a huge mission of the fund. We also have reserves that we can draw on to help with any liquidity shortfall.
00:15:20
Speaker
In terms of the investments alone, we are investing in a diversified portfolio of liquid fixed income assets. So it's very different to maybe investing in a property fund. We're trying to liquidate the assets can take years. So we're trying to make sure that the part of the market that we're investing in is liquid so that we can make withdrawals easy at the end of the day.
00:15:44
Speaker
Yeah, that's interesting. And I guess you're talking about liquid fixed income assets. What is the duration of the average investment that you make? And where do you see that moving to, given that you want to maintain liquidity?
00:15:58
Speaker
So at the moment, we have a very diverse range of Blossom customers, very diverse. And some of the use cases we're seeing is people want to put their entire home deposit into Blossom. And so we have people with account balances between 300,000 to 400,000.
00:16:15
Speaker
And then on the other end of the spectrum, we also have people who have very tiny balances, $1, $5, $10. And so I think it's giving me a lot of joy because we really have opened up this product for everyone. So it doesn't matter who you are, how much you have to start with. Blossom is a product for you.
00:16:34
Speaker
I think in terms of launching only six weeks ago, we're seeing the average change a little bit every day. But a huge point for me is that fixed income has always been a part of a portfolio for an average institution or a high net worth individual. And it just makes up a well-diversified portfolio. So I hope that with millennials and providing new access to this fixed income market,
00:16:58
Speaker
that their balance might rise and fall with us, but they will always have some exposure to this type of asset class that is fixed income, because for the simple reason that it's just traditionally less volatile than your standard equity is.
00:17:12
Speaker
So you mentioned the balance of the fund rising and falling, Gabby. What happens if, and I'm sure it doesn't, but what happens if the portfolio runs at a loss? What sort of procedures does Blossom, I guess, have in place to minimise that kind of outcome? And I guess if it's been running for six weeks, you probably haven't seen the liquidity event yet, but do you have the procedures in place to handle that?
Risk Management and Returns
00:17:33
Speaker
We have three key risk mitigation strategies and this makes us confident and helps us know that we will likely be able to continue to target these 3% per annum returns for the long term. So first of all, we have an incredibly expert team. So our fixed income managers have
00:17:52
Speaker
18 years of fixed income experience with previous experience at the UBS and the RBA managing close to $30 billion under management. So it's huge figures. It's a tried and tested strategy and our fund manager as well received the only highly recommended rating from Zenith for his time at UBS. So it's an incredible feat. Second to that, we have a threshold management agreement. So we have a unique structure of the fund where when the fund makes
00:18:21
Speaker
3%, that's automatically passed to the customer. And anything above that we use to pay out our external fees, and then the rest is stored in a buffer type structure. So we can use that to help with liquidity issues and fund withdrawals.
00:18:36
Speaker
And then lastly, we are investing in a highly diversified liquid element of the fixed income market. And never in Australian history has an investment grade bond gone into default. And the actual average rating of our bond portfolio is A. So that's just for one credit never going into default. Imagine that times multiple credits.
00:18:58
Speaker
So there are three key risk mitigation strategies, but in terms, and to answer your question more directly, if the portfolio does run at a loss, we have three main options of what we can do. So the first thing that we can do is use 0.2, so our threshold management agreement and our buffer, to help fund some of that loss.
00:19:18
Speaker
two, we can reduce the return temporarily, and three, we can reduce it more permanently. But then I would go back to point three, and never in Australian history has an investment grade bond gone into default. Our average rating of the bond portfolio is A. So these points just help us feel a little bit more confident that we can target those 3% returns for the long term.
00:19:40
Speaker
Gabby, given all those positives, what's the one reason you wouldn't invest in the fixed income market in your view? Or is there really generally no reason that it does just increase diversification benefits across a portfolio? I definitely think that it increases diversification and it makes up any healthy portfolio for any high net worth individual or institution.
00:20:02
Speaker
But there's definitely something to be said for age that if generally you have a high risk threshold, which is not something that I have, and you want to go and target far higher yields and you want to take way more risk to increase the upside, then I think that's great. But if you have a lower risk portfolio or lower risk profile, like I do, then it's definitely something that I would look to invest in terms of fixed income.
00:20:29
Speaker
Yeah, it's quite interesting and I love how you've kind of made it quite gender friendly as well because what research shows and what I'm sure you're aware of is that females as a general rule do tend to be less risk seeking. So they are a bit more risk averse. So it is the perfect way for potentially females or investors who are less
00:20:50
Speaker
risk averse or more risk averse to actually dip their toe into an investment class that does provide some return, does provide some risk, but it is a lower risk asset class than what a stock market investment would provide. So given that, what are the goals of Blossom? Where do you want to see your funds under management grow to? What's the bigger picture here? So we're six weeks in almost to the day. And at the moment, we're sitting with about 6.7 million in funds under management. So it's been an incredibly exciting start.
00:21:20
Speaker
And I think if we could get to 50 mil in FOM by the end of year one, that that would be a fantastic achievement. And I would be thrilled. That's definitely an amazing goal,
Marketing Strategies for Blossom
00:21:34
Speaker
Gabby. And I will be so excited to see if FOM get to that level. So I guess in terms of that goal, how do you find marketing blossom and how are you planning to grow that client base? You know, in your opinion,
00:21:47
Speaker
What is the best and easiest way for people to get information about Blossom? Because it clearly is such a fantastic offering. Thank you. Thank you. So we have a whole host of ways that we want to reach new customers. So all-inclusive of paid ads, PR, podcasts, social media, using influencers in the finance space. And we're also about to launch a referral program too.
00:22:11
Speaker
Partnerships is a huge avenue for new customer acquisition for us as well. And the best way for people to gain access and information to Blossom is definitely by jumping on our website, which is just blossomapp.com.
00:22:25
Speaker
Great. And ESG is a topic that Cleen and I have actually talked about on every single episode so
ESG Commitments and Impact
00:22:33
Speaker
far. And you mentioned that you do have some exclusions and ESG filters around your investment process. Obviously, the plan to trade initiative for a new client is something that really ties true to values and has an environmental benefit there as well. Can you tell us a little bit about that project where your
00:22:50
Speaker
planting the trees because that can be a consideration for investors about where exactly these projects are based and how that's going so far. So we're planting trees in Aussie bushfire affected regions for every new funded account. And we're also about to launch our referral program, which I'm super excited for. It will be coming in the next two weeks. And what happens is when you refer friends and family and they fund their account for the first time,
00:23:17
Speaker
you both receive $5, but you have a choice with how you can spend this $5. So one, you can keep it and we'll transfer it straight into your Blossom account. Two, you can plant or instruct us to plant five more trees for you using the $5. And three, you can donate it to the Garvin Institute for pancreatic cancer research trials. And in terms of the tree planting, so one for referrals, two for every new funded account.
00:23:42
Speaker
we've partnered with an organization called One Tree Planted and they make it very easy. They handle all the planting for us and all we need to do is just instruct them for where and when we need those planted. Well, I'm definitely going to refer to Gabby and I might be a family too.
00:24:01
Speaker
Blossom has already seen a pretty successful growth and business story. This is not such much a finance question, but what's the first step to starting a business?
Advice on Business Development
00:24:12
Speaker
Where did you begin? How much time did it take? And I guess now in your shoes, what does a typical day look like?
00:24:20
Speaker
The first step to starting a business in my opinion is you need an idea and you need people to think that your idea is feasible. It can't just be something that you solely believe in. And so I think the quicker you can get your idea into the hands of users for testing and feedback, the better. And then from there, you can decide whether the idea has real legs without spending all your time and money on something that might not work and might not actually be feasible. So I think that's a really good place to start.
00:24:48
Speaker
With Blossom specifically, it took us about almost a full year from idea to launch, which I think is generally within the ballpark of how long it takes. FinTech, I think, probably a little bit longer. But with COVID and with heaps of time on our hands, I think we got lucky with some of our decision making and the speed at which we were able to move.
00:25:10
Speaker
But in terms of what my day-to-day looks like, and a big part of why I love my job is because it's very different every day. But a typical day would be wake up, go for a run, have a coffee, start working. And the first thing I always do is check new accounts created overnight, check the fun that's come in from overnight. And then I can move into some of the banking. So we post your earnings daily. So facilitate the posting of that. Check the deposits and withdrawals.
00:25:39
Speaker
We're then app-based and app-focused. I'll move into some product and work with the developers on whatever the new feature release is for the day. So at the moment, we're working really hard on our referral program, so it will be a lot to do with that. And then probably speak to a new partner because we're trying to build up our partnerships, see if there's any synergies, take them through Blossom, come to some sort of agreement.
00:26:02
Speaker
and then continue to work on other projects. So for example, a big project now is writing content from our website. So an investor can come onto the Blossom website and they have all the information they need on Blossom's ESG, Blossom's security, what's included in the fund, what's excluded from the fund and how Blossom works in general.
00:26:22
Speaker
Yeah, that's great. And I guess Clooney and I are testing our business idea right now with Alpha Females Invest, so we can definitely relate to some of that.
Career Wisdom from Gabby
00:26:32
Speaker
We finish every episode with asking our guest a final question, and that's the top career tip. So we would be very grateful if you could share what your top career tip is for our listeners.
00:26:44
Speaker
With my career and decision making, my rule of thumb is that if it's not a hell yes, then it's a no. So all these questions that run through your mind, do I stay in my job? Do I take a new job? Do I go out on my own? You just have to ask yourself the question, is it a hell yes? And if it's not, then it's a no.
00:27:05
Speaker
Well, I think it's a hell yes to listening to this podcast, Em. Agreed. Thank you so much, Gabby, for coming on today. I really enjoyed the topic of conversation, and I just think it's so fantastic to see that there is a product out there that is investable to the average panto or the young financier. So it's just fantastic. I wish Blossom the best of luck going forward, and hopefully we can have you on the podcast when you reach 50 million fun.
00:27:32
Speaker
Thank you for having me guys. I would love to be able to keep you updated on our journey and maybe to the listeners stay tuned for June 2022. Awesome. Thanks Gabby. Have a great day. Thanks Gabby. Thanks guys. You too.