Transcript

Matt Heine:

Hi, welcome to the show.

Kendall Flutey:

Thanks for having me. It's great to be here.

MH:

It's been a little while, Kendall, since we last had you on the show. I was just going back through the various episodes, it was episode 35.

KF:

That's the one, that's a while ago, isn't it?

MH:

It is. I think it may have been pre COVID, one of the last ones I did possibly in 2019.

KF:

That sounds about right.

MH:

So what a great opportunity to hear what you've been up to. I think rather than maybe than giving the full background to Banqer, for those that haven't listened to 35 and I recommend going back and having a listen, maybe just a quick overview of what Banqer is and then we'll get into sort of some of the trends that you're seeing.

KF:

Sure. So Banqer is a financial education company and we make a financial literacy product called Banqer Primary. And it's used in schools all throughout Australia, with the supportive Netwealth, and it develops the students financial literacy and their financial capability in a really engaging simulative way. So our platform essentially turns a classroom into a mini economy and students create their Banqer account and then they start earning fictitious bank dollars for turning up to school and engaging positively in their classroom. They have to pay classroom expenses for renting their desks or maybe device rental or wifi, whatever their teacher comes up with. And then they start to get into the really exciting financial concepts like enrolling in superannuation, investing, managing their risk, they might actually take out an insurance policy, buying a car, buying a house. Everything that you and I do, they get to simulate and practise in a bit of a sandbox environment, through Banqer Primary.

MH:

Fantastic summary. You touched on something that I'm pretty passionate about, which is the difference between financial literacy and financial capability. Do you want to just talk about for a little while maybe why that's so important and maybe why even financial advisors, particularly when they're dealing with their clients, need to understand what the difference is, because it's quite nuanced but important?

KF:

It is a really critical, important thing to distinguish. When we think about financial literacy, and that's probably the term majority of listeners are used to hearing and referring to, it's usually what shows up in the news articles or the statistics, financial literacy is really your knowledge about money. So if I asked you to define compound interest, could you do that? Or if I asked you a question about managing risk, would you answer that effectively? And that's sort of the foundation of financial education, everyone needs a certain level of knowledge about money in order to be able to manage their money effectively.

Financial capability is putting that knowledge into action. So you may have got the question about compound interest correct, but then what are your behaviours when you go and engage with debt products or when you want to open a term deposit, what do they say about you putting your compound interest knowledge into practise? And that part gets really tricky because that's kind of the human part, that's where we mostly trip up, sometimes intentionally and sometimes unintentionally.

MH:

And given that Banqer is a virtual economy, do you find that children are actually getting that money experience? How does that translate that into real life and their understanding of financial literacy?

KF:

I mean, our platform's all about experiential learning. Evidence would suggest that we learn best about money through trial and error. Unfortunately, the majority of us have to do that in the real world, with real world consequences. So our students definitely get that hands-on practise and because we're a tech platform, we get to collect a bunch of data points around the development of that capability. We get to see them opening an appropriate bank account for them. We get to see them potentially taking out insurance after an event that affected an asset they own. We also see some of that translating into real world, and we do that through impact reporting, whereby we hear about students actually engaging in the real world, either with the parents or with the parents support because we're working in primary schools, by opening up a financial product or asking the right questions to their parents when they're engaging with their financial products.

MH:

And I think that's a really interesting point. There's probably a bit of a gap when you first rolled out the platform between what the kids were learning at school and the financial literacy of their teachers and also their parents, and you embarked on a bit of a programme to uplift the capability of both. Just interested if you tracked or seen any improvement in either of those cohorts?

KF:

We have. So engaging family is such a critical component to effective financial education of our students. We did a deeper dive impact study recently, we haven't quite announced those results yet, but family, family, family, they show up in every single insight in a material way. So we have engaged our parenting and guardian cohort by taking them on that financial education journey with our students, and we've had to do it in a way that's sort of accessible for that family and where they're starting. And really the main way our parents can contribute at a baseline is actually just by talking about money. It's pretty crazy, but looking at the recent stats, I think 89% of Australian parents, this is some FPA research, believe that their kids should be learning about money at school, so that's nearing a resounding majority, but only 42% of parents actually talk about money at the home. So there's a bit of disconnect there in terms of perhaps their confidence, their capability or their literacy levels, so we try and really include parents in that conversation.

MH:

So this might be delving into deep psychological areas for moment, but what I've been interested in, you've managed to take what a lot of people would consider a very boring topic and you've managed to get children highly engaged. And I've talked about it with you before, I've never been to a school and talked to a group of students who have been so excited about retirement, let alone a group of adults. So when you've designed the programme, how have you thought about engaging with the children and building on that base knowledge but keeping them excited? Because I think a lot of those lessons can be applied to people listening to this podcast when they're looking at helping to coach and educate their own clients.

KF:

Yeah, that's a great question, Matt. I think fundamentally it comes back to the fact that we might consider financial literacy boring, but that's probably typically a lens that we have had to look through because we haven't been able to engage with money in the way we have wanted. It hasn't necessarily been ... maybe we've navigated some adverse outcomes, but when our kids are looking at money, they're looking through the lens of unlimited possibility. So from a psychological perspective, and look, I'm not a psychologist by any means, ex accountant/software developer in the room, will put that out there to start with, but we try and treat students with the responsibility that is needed to navigate the financial world by meeting them where they are today.

So with that, I mean that we give them the opportunity to navigate the financial world just like their parents do, but in terms that they're already used to dealing with. So these kids live in the digital world, so navigating their finances digitally is actually a very safe comfortable environment for them. In the app, we have streaks and we have other social concepts that they're used to, so we make money familiar sounding to them, but we don't remove that layer of responsibility, which I personally think is one of the reasons they're so engaged. They feel like they're doing adult things, but they're doing it in a way that sort of speaks to them.

MH:

And it's an interesting concept that you've now taken to high school students. And I guess where I'm going with this is how can we take some of these principles and apply them to adults? But what were some of the big changes that you had to make from going to teaching children that were between the ages of eight and 12, to 12 to 18?

KF:

Surprisingly, the content itself, there's not too much of a leap between what we're serving and that may sound strange, what we're serving an eight-year-old and what we're serving a 14-year-old, there's still those foundational financial concepts that we're exploring. Some are repeated from platform to platform, there's some new stuff in there which is more age appropriate for that older cohort. But fundamentally, the way in which the student engages with it is quite different. One is in being primary, very much so teacher led learning. So the teacher's facilitating a lot of those student outcomes and a lot of it is quite collective in the way that it's being delivered or engaged with within the platform at a primary school context.

In secondary, it's a lot more individual in terms of the student path and their progression through the platform. And that speaks to the fact that they've got a lot of those foundational concepts and now it's actually about actioning them in a way that aligns with their values and it provides them with opportunities to make decisions and have a bit of a play around in their financial world. But fundamentally, we've got super in both platforms, we've got risk management in both platforms, that stuff doesn't change. And if you don't know it when you're 10, there's a chance you may not know it when you're 20, there's a chance you may not know it when you're 50, you're going to have to cover that same foundational content.

MH:

And given that it is student led for high school, have you seen a drop-off between those that were highly engaged maybe through primary school, to having to actually take ownership themselves? What percentage of students are actively engaged?

KF:

We haven't really seen a noticeable drop-off apart from the fact that we're newer into the secondary school space. So we don't map perfectly from primary school to secondary school in that secondary schools haven't all adopted the platform yet, so to speak. I think in terms of that student lead learning, that's what the students are wanting and that's a natural progression for them at that stage, to take a bit more ownership of their learning and the fact that personal finances start to feel a little bit more personal as well. Although it is student led learning, we definitely still facilitate the opportunity for students to shine, and we do that through the likes of leaderboards. So we actually at high school have some highly competitive students who like to see their name in lights, be it them having the biggest net worth or be it that they have donated the most to charity this year. We don't have one single definition of financial success because really that comes down to the individual.

MH:

It's really interesting. And I presume, given that you've got such a broad range of modules that you now offer through Banqer, whether that's primary or secondary, which are the ones that people engage best with, is it property, the typical Australian dream or are there other areas?

KF:

That's a great question. I actually think it's not property an either platform. So interestingly enough, in primary school we would see the highest spikes of engagement in risk management. So that would be insurance. So I guess to some extent property insurance, but also car insurance, vehicle insurance. Students particularly love the real world application to that in a sense that their teacher will trigger a disaster and there'll be impacts for the students and we communicate the way in which that affects them. And sometimes our teachers will literally sort of map out the classroom like a cyclone's been through and desks will be tipped over, and so it's a real visual experience for the students. In terms of secondary schools, definitely the stock market, the Banqer High Exchange is very popular and I think that again speaks to sort of some of the new financial products and services that have come into the market even since we last caught up, Matt.

​

Listen to more Between Meetings podcasts

In this podcast series Matt Heine, Joint Managing Director of Netwealth, chats to industry professionals and thought leaders on what opportunities and challenges they see for financial advisers and the wealth industry as a whole.

Listen to the episodes

 

MH:

Does that mean you've had pressure to add crypto?

KF:

We got a lot of interest in crypto. I'm glad we held our line through the bull market, and we didn't introduce cryptocurrencies to the platform. The concept of alternative currencies in itself is an interesting one and blockchain and we have explored resources around those facts. But no, we certainly weren't advocating for students to dump their life savings into Bitcoin or anything like that.

MH:

That's actually a very good segue. I've got all sorts of questions that I'd love to ask you in a moment, just around you and your business and how you're finding that as you sort of migrate to more of a for-profit business model. But before we do that, AI obviously talk of the town again with generative AI coming to the front. How are you thinking about that as it relates to Banqer, digital experiences and also your own business?

KF:

AI is a really transformational moment, and I don't mind going on the record saying that this isn't like the blockchain and the crypto, this is fundamental new tech and it's a bit of a paradigm shift for our technology as consumers, but also producers of technology. I use AI most days at work now, even if it's just running my thoughts and feelings past ChatGPT or whether it's implementing an add-on to support me in spinning up a spreadsheet a lot faster than I otherwise would. In terms of Banqer as a platform, I think AI lends itself really nicely to personalised learning pathways. When we think about the Banqer economy, there's a lot of different scenarios that can play out for students and students can end up the end of the year with vastly different superannuation balances and investment portfolios and property portfolios and generally bank balances, but it won't be super unique, that could be replicated by five different students across our complete user base.

When we think about a personalised learning path, sort of speaks to just in time learning and really contextual learning. And that's the thing that we can leverage AI to support us with doing, and really ensuring that when we talk about certain financial literacy and capability markers, we want every Banqer a student to walk away with, and AI can really support our platform to ensure that students do build that student profile and no one really slips through the gaps. I think they can also just make the experience way more fun for our students too. So I'm really excited about exploring that tech, I think we're a bit green in terms of the tools and technologies out there yet. And also what that means from a privacy and security perspective for our schools, that's obviously dealing with minors, that's front of mind. We don't want to be first movers in that domain. I'm really excited about the potential of AI for not only our business and our tools, but also for what it can provide from a student outcome perspective.

MH:

I think you summed it up well. This is actually a or will be a revolution, not an evolution, of technology. Chatting to someone recently, it was quite a sobering thought, that up until now I think one of the best bits of advice was to invest into your capability in digital technologies for the future, whether that's data or programming, whereas that seems to have been now largely replaced with some of the new technology. How are you helping prepare kids for a future that is pretty uncertain?

KF:

I think one foundation that all of us need to navigate the world ahead, whatever that looks like, whether it's through displaced industries or jobs or whatever it may be, is a solid understanding of our financial reality and how we can best prepare our financial foundation to navigate the unknown of that world. We do obviously, in our platform, dive into careers and career pathways for students, but I think even we would be naive to think that we can predict the future of careers. We will see a lot of displacement and replacement over the next decade. So our Banqer students who are eight now, when they leave at 18, we could be presenting them, what we presented them could be completely different to what the world presents them.

So more than anything, I hope that we are able to communicate to Banqer students the importance of understanding your financial responsibilities, your financial rights, your financial position, to help them navigate those unknowns. In terms of the career side of things though, I'm really excited about Banqer's platform, making kids question not what career do I want, but what capabilities, to your point earlier, what capabilities do I need to thrive in a changing world? And I think that's a question that a lot of ed techs are going to have to be asking themselves.

MH:

Do you see yourself expanding beyond financial literacy and capability as a result of that?

KF:

Oh, Matt, I'm the wild founder, so I've got ideas left, right and centre, but no, I think our mission is really clear that we're dedicated to preparing the next generation for their financial future, so that gives us some sense of focus. Right now we're focused tightly on financial literacy and capability to achieve that. But if it becomes evident in an evolving world that actually we need to broaden our remit, we'll absolutely explore that. But there's a lot in terms of New Zealand and Australia's financial literacy rates right now, having a pure focus on that definition, there's enough work to keep us busy.

MH:

And on that point, are you seeing governments make any meaningful movement in helping to educate more students around their financial literacy and what Banqer might actually play in that?

KF:

Since episode 35, we had the Royal Commission Inquiry into Banking, and off the back of that we saw some meaningful change. Some financial service providers, namely banks, they had a bit of a spotlight on what they were doing in schools and subsequently some new regulation was changed, which is great in itself. It's definitely a signal to the market, but more so it really started to encourage schools to question the role of financial education in their schools. So it's much easier for us to have conversations with schools about financial education when that spotlight's been, a bit of a focus being put on them. But I do think there is more that government can do and we are currently engaging with the New Zealand government around this, in terms of the curriculum requirements and financial literacy having a stronger presence in our national curricula.

Right now, it sort of features through the likes of humanities and math, but a student can very easily navigate the Australian schooling system without understanding the basics of financial literacy. And given the fact that we know our financial literacy rates as a nation, we know that parents are struggling with this themselves, it's an intergenerational issue, we really need to have that governmental directive that financial literacy belongs in school. So to answer your question, we're seeing some progress, but I'm always going to advocate for more and faster progress.

MH:

One of the areas that I'm seeing in more and more schools, which I think is really interesting, and maybe this is an area you're thinking about, is entrepreneur programmes within schools. So the ability, it's almost home economics done in the 21st century. But are you seeing anything interesting happening either in New Zealand or Australia around that entrepreneurial piece?

KF:

There is a lot. There's been a wee explosion over the last couple of years, especially in Victoria, I know of a few alone within a few kilometres of each other that provide some really interesting courses for schools or frameworks and resources for schools. We ourselves are really clear on the divide between enterprise and financial education. We look to work with the providers of enterprise. We think financial education is sort of that building block to entrepreneurship. So you can have your financial house in order and then you can go off and build your wildest dreams in a business sense as well. I think the reason it's been so popular is because it's cross-curricula, in that order to get a business spun up, you need to have good numeracy skills, you need to have good literacy skills, you got to have creativity. It sort of explores all of the broad subjects that we want our kids to be learning at schools anyways. So I really like it as a project-based learning tool, for sure.

MH:

And speaking of entrepreneurship, you've now shifted the focus of the business a bit from, I guess, what you might describe as a social enterprise, to a social enterprise for profit. How are you finding that shift?

KF:

Love it. I think it's a natural progression for us. Yeah, we're a B Corp, we were New Zealand's 14th registered B Corp. So pretty early on we established that we wanted to be for good, whatever that meant to us. In terms of the commercialisation of the business, I think it's really healthy and it's the age and stage and bit of the coming of age for us. Fundamentally, it comes down to the fact that we have a purpose, to fuel that purpose we need profit. And historically we've had fantastic support through our partners, Netwealth has been on this journey since very early on. I mean that's an interesting story in itself that we covered off in that early episode. But to ramp up and have the impact and the scale that we want, we need to be ensuring that we're equally focused on the commercials of the business, as we are the impact of the business. And I think we've found and struck that balance really well in the last sort of 18 months.

The Netwealth Portfolio Construction Podcast

In this podcast series, our investment research team pick the brains of key wealth management professionals to uncover unique insights on the investment areas they are most passionate about.

Listen to the pocasts

 

MH:

One of the things that you wouldn't have had to do historically is raise money. How did you find that whole experience?

KF:

Oh, gee. Yeah. You've got to go through it to know about it. I am very much so an individual who before I embark on something, I want to know as much as possible about it. I really dive deep into it. But this is one of those you don't know what you don't know until you know it and you could never prepare enough for it. I learned a lot though, and I think as an exercise, it really helped me shine a light on some of the flaws in our business, some of the areas that present opportunities, untapped opportunities, and generally speaking, it just ensured that we tidied house and we were all collectively, there's 18 of us now, collectively understand our priorities, our purpose, and know how to move there together. So I don't know if I did that much that last year, apart from that, my social calendar probably took a bit of a hit. Thankfully I still got some friends around me. It was a really meaningful exercise and I guess from an outcome perspective, we also ended up with some fantastic investors who add more to this journey than just capital.

MH:

I was going to ask, without necessarily naming names, just the type of investors that you did end up coming into the business. Was that impact funds, individuals, family offices?

KF:

All of the above. Yeah, I think the binding thread would be really valuing that healthy tension between profit and purpose. And look, we kissed a couple of hundred frogs to get there and that was probably learning on our part as well, in terms of who our best fit investor is for this age and stage. But we did end up with people who are, they care about impact, very impact focused, but they appreciate some good commercials to drive impact.

MH:

And you mentioned before, as you meet with the investors that you got feedback, you had to think deeply about a lot of the things that you were doing. You've gone from a business of maybe half a dozen people to 18, as you mentioned, probably a similar growth path to many of the people listening to this podcast. What were some of the key learnings along the way? What might you have done differently and what worked well?

KF:

Oh, so many learnings, it's hard to pick from the top of the pile. I think when I look about that leap and it really felt like a leap, from six, seven people to 18, it does all come back to people, doesn't it? So one of the things was getting real clear with my co-CEO, Simon, around what we wanted our roles to be and therefore what hats we wanted to take off. Taking a hard look in the mirror and telling ourselves, "And you are going to take this hat off and you're going to be supportive of that person." You got to make space for great leaders in your company. And then one of the biggest takeaways for me was we should have been hiring earlier. We waited until we had all of our ducks in a row and the round was finalised and fully subscribed, oversubscribed actually.

But it's been a tough market out there from a hiring perspective and as a result, sort of things are a bit slower than anticipated, but we could have escalated, brought forward some of that hiring and had a bit more faith in our ability to execute because at the end of the day we knew we could. Other than that, it's just a processes thing. You just grow up and you have more documentation and things, they don't necessarily have to slow down, but they're a bit more considered and thoughtful. And striking that balance for us because we are sort of in between the startup and scale up, I would say profile, has been a bit of a learning curve and still is a challenge for us to navigate today. Make sure we are going fast enough and executing against our investment hypothesis, but also making sure we're documenting enough and collaborating enough as an 18 person team. So yep, look, we're right in the middle of that learning curve, Matt.

MH:

One of the hardest things, I think, as a founder, as you touched on, is working out which hat to wear and which one not to wear. How did you go through that process and what was the hardest thing for you to let go of?

KF:

Whiteboard was the process, got in a room, Simon and I got in a room, we're not leaving until we're really clear on our current roles and what our future roles are. And then when you write down 20 roles on the whiteboard for yourself, it's pretty obvious that that's not realistic and that's not going to support the ultimate vision that we have for the company. I think we allowed ourselves some luxury of what do you actually enjoy doing? But at the end of the day there's also the, well, what are you best positioned in the company to do? And once you work through a bit of a matrix of those things, it sort of just spits out at the bottom.

One thing that I'm never going to let go of though in some shape and sense is product, I fundamentally believe that a CEO or a senior leader in the organisation should have a strong hold of product. And likewise for Simon, customer success and satisfaction is a key component that we need to be holding onto too. So yeah, look, we're 18, I say it like it's this big number, in the scheme of things, it's a very small business, so we're still very much so across those functions.

MH:

And it's fair to say that at the moment things are pretty tough in the tech world. Some or a lot of companies don't necessarily have the cash balances or the investors at the moment to support them over the next 12, 24 months. What advice would you have for small businesses that are starting to head into fairly uncertain times?

KF:

Oh, I don't know how well I'm positioned to give advice to founders navigating tumultuous waters. One thing I noted in engaging with all the investors that we did last year was this massive shift of investor narrative, away from growth at all costs, to profitability. So we were quite well positioned for, I guess for that discussion in that we were at least breaking even as an organisation. We weren't trying to grow at the expense of profitability. So I guess one thing is listen to the investment sentiment and if investors are looking for profitable companies or companies that have profit on the near horizon, then you need to decide whether you want to commit to your strategy and be creative with how you can fund that yourself, potentially bootstrap. We bootstrapped for seven years, you can do it or you're happy to sort of mould your narrative around the needs of investors. I fundamentally think a founder needs to believe in their financial direction, and I wouldn't necessarily pivot just for investors, but if you're reliant on their capital, you have to listen to the information you're receiving from that group.

MH:

Because the investment thesis shouldn't have changed a lot from an investor perspective, where they knew what the cash burn was going to be for however many years. But have you already seen some investors shifting the conversations?

KF:

Massively. I would say nearly 80% of our conversations, particularly at the bigger end of the town, have really changed their narratives from what my founder friends who were raising two, three years ago were hearing. Look, I agree with you, that shift seems a bit strange in that really what has changed, but you really have to listen to the narratives you're hearing from investors and determine what information is information you're going to act on and what information you can let pass you by and you can hold true to your own vision, your own business model and forecasts.

MH:

Kendall, we're going to run out of time shortly, but I know you're an inherently curious person, so I'm intrigued to know outside of Banqer, which takes a lot of your time, what are some of the things that are interesting you and are there any good podcasts or books that you might recommend?

KF:

I am very curious. I am also a terrible over-committer in terms of personal projects and committing to projects with friends. At the moment am actually writing a book, a fantasy book, so that takes up a lot of my time. It's a totally different wheelhouse and probably no one listening to this will ever want to read that book if it ever gets published. That takes up a lot of my time.

MH:

There's a quick and easy way to do that. I've just started using ChatGPT to write my son stories before bed every night. So we pick the theme and then it writes 1,000 words.

KF:

Well, the cool thing is AI is supporting me to do that. And then also, from an imagery perspective, I'm using Mid-Journey to sort of understand these landscapes of worlds I'm building. So look, I think in short, AI is something I'm investing a lot of personal time into at the moment, to understand, not necessarily to become proficient in their use or an AI developer or anything like that, but just to understand the evolution of AI and the sector generally speaking, that's where I'm investing a tonne of my time.

MH:

Fascinating. And books or podcasts that you recommend?

KF:

Oh, books. Again, I don't think anyone on this podcast will be that interested in my books, they're all high fantasy and fiction books. I did read an interesting non-fiction book called The Tyranny of Merit, which very much so relates to what I do and the concept of meritocracy, which I would highly recommend.

MH:

Wonderful. Now for those that are interested in Banqer, what's the best way that they can get involved with it as a financial planner spreading the word or as a parent?

KF:

Yeah, the best thing I could suggest is to jump onto our website Banqer.co and jump onto Banqer.co/netwealth, which will take you to a page that speaks a little bit more about what we're working with Netwealth to achieve in Australia. And from that very landing page, you can suggest Banqer to a teacher or someone else who can make use of it in their school. It's the best way to sort of refer people to our platform.

MH:

Fantastic. Thank you so much to you and the team for everything that you do, particularly for Australian children. And goes without saying, if anyone listening is interested in finding out more, I'm always more than happy to have a chat. So thank you Kendall, and look forward to having you in Australia in the not too distant future.

KF:

Thanks, Matt. And also appreciate Netwealth's support, it's been incredible. We are going to hit the 100,000 student mark this year together, so definitely going to have to come across and celebrate.

MH:

That's an amazing outcome. Thank you.