Malaysia will see the launch of its first shariah-compliant gold savings platform in October. Unlike other trading platforms and investment accounts, HelloGold is aimed at the man in the street, allowing investors to start saving in gold for as little as RM50.

The launch of the mobile app — the brainchild of CEO Robin Lee — is seen as timely in this uncertain global economy that is making it harder for investors to get returns. “Events such as Brexit, China’s slowdown and the waning effectiveness of monetary policy have spooked investors in the past few months, resulting in a flight of capital to safe-haven assets such as gold,” says Lee.

“The intensifying political and policy uncertainties in the global economy, which is enough to keep growth subdued in the medium term and leave investors in a high-risk, low-return world, have led to calls for a more pragmatic investment approach. Investors will need to figure out what mix of assets offers the best chance of surviving a global event.

“For many, gold serves that purpose. When disasters occur and the global economy collapses, gold always seems to rise. Last year, the ringgit weakened 20% after oil prices plunged, but gold prices went up. In the past 12 months, gold has shot up 15%.

“The man in the street who holds a huge amount of cash in the local currency needs something comfortable and secure to diversify and save their money with.”

The local scene presents a challenge though. Lee is launching the platform at a time when savings are being squeezed and investors are wary of gold investments, amid unresolved issues following the alleged gold scam involving Genneva Malaysia Sdn Bhd that saw many investors get burnt.

Genneva, which promised investors a yearly return of 21% to 30%, raised as much as US$3 billion from the Malaysian public before it was shut down in 2012 by the authorities. In July 2014, 1,065 gold traders filed suit against the company for breach of contract for the RM146 million in gold products and money owed to them. At press time, the case is still ongoing.

How does Lee intend to convince the public that HelloGold will be different from such schemes? He says the company adheres to the international best practices adopted by gold bullion providers to ensure transparency for the general public who buy gold.

For starters, Lee is working with renowned third-party international auditors such as Bureau Veritas to conduct daily audits on the company’s physical gold holdings held in a vault in Singapore. The company will also insure the gold and allow its investors to visit and audit their gold holdings in the vault (see accompanying story on “Stringent auditing process”).

“We have proper documentation to show you the gold we have bought. We have an audit trail to show that we are very transparent. Our users will also have product fact sheets, just like any other financial products they buy or invest in,” he says.

Lee, who quit his job in the UK and returned to Malaysia last year to start HelloGold, aims to restore the public trust in gold savings and provide them easy and secure access to owning this precious metal. The app will be the first platform in the world that allows users to obtain loans using gold as collateral.

“For the wealthy, buying gold is very easy. But the mass market does not have such easy access as they are exposed to risks such as scams. We are here to solve this problem by allowing the general public to save their money using gold 24/7, with a minimum initial investment of RM50 via the mobile app,” he says.

Lee emphasises that HelloGold does not guarantee or promote any returns. Instead, it is an easy savings option for the man in the street. “All we say is that gold has provided 7% returns on average in ringgit terms from 1992 to 2015, which makes it a good tool to hedge against inflation and a safe haven [in the current economic conditions],” he says.

Lee should know about turbulent economic conditions. He saw how the Asian financial crisis in 1997/98 and global financial crisis in 2008 wreaked havoc on the middle-income group who had saved their money in bank accounts. This gave him the idea for HelloGold.

“During the Asian crisis, the ringgit went from RM2.50 to RM4.70 against the US dollar. Suddenly, the middle class who saved cash in the bank saw their money worth a lot less. It was devastating and it was not through any fault of their own,” he says.

“Every developing country has this problem where the mass market, the people who can least afford to have bad things happen to them, are also the most exposed [to these currency devaluation risks]. This has been a problem for a long time. So, my vision is to find a vehicle to solve that.”

Lee’s previous role as chief financial officer of the World Gold Council (WGC) — an international market development organisation for the gold industry based in the UK — stands him in good stead to helm HelloGold.

“When the role at the WGC came along, I saw the opportunity to do something about this problem. I spent five years working there. Two years ago, my CEO allowed me to resign to come back to Asia to do this [start HelloGold].”

During his five-year tenure there, he was the principal accounting officer for the SPDR Gold Trust Fund, overseeing accounting functions of the world’s largest non-government gold fund. The fund, with US$40 billion in gold under management, was developed by the WGC in 2004. Besides his involvement with the SPDR Gold Trust Fund, he also developed a new concept for sovereign gold-backed bonds for governments to lower their sovereign debt yields through the securitisation of central bank gold reserves.

Before WGC, Lee spent 15 years in the financial services industry. “I worked as a consultant with the Boston Consulting Group, specialising in corporate finance and strategy, and as head of research and strategy at the Securities Commission Malaysia before leaving for the UK. [SC chairman] Tan Sri Ranjit Ajit Singh was my manager at the time,” he recalls.

At the launch of HelloGold, the company will announce a partnership with a financial institution to market the product to its five million customers, says Lee. This partnership with the financial institution, which is listed on Bursa Malaysia, will speed up the distribution of the product to the public. “More importantly, it will boost public confidence in the product and strengthen its credibility,” he adds.

Lee says HelloGold will be ready for regulation by Bank Negara Malaysia in the future. In mid-July, the central bank issued a discussion paper on the regulatory sandbox approach for financial technology (fintech), which will allow financial institutions and fintech firms to experiment with fintech solutions subject to appropriate safeguards and regulatory requirements.

“We will apply the regulatory sandbox approach when the rules and regulations have been finalised by Bank Negara,” he says.

According to Lee, in the unlikely event that the company folds, investors will still own their gold deposited in its vault. “Yes, if we get shut down and liquidators come in, the creditors will not be able to get the gold. The gold is still yours [referring to HelloGold investors] and no one can touch it because it does not belong to the company [and is not on its balance sheet],” he says.

Targeting the middle class

Lee and his partners approached friends and family for seed capital to set up HelloGold. The money was used to get the management team in place and develop the mobile app. The company is now at the Series A stage of funding.

“The round of funding will allow us to demonstrate our value proposition to the world. We are not prepared to declare the valuation of the company and how much we are aiming to raise in the next round of funding yet. We will announce it at the right time. We are focusing on getting the product ready for launch,” says Lee.

He adds that the company is targeting those who earn between RM30,000 and RM90,000 a year. This group tends to be young urbanites who are relatively tech savvy and comfortable performing transactions with their smartphones. They prefer to get things done virtually but lack the internet and technological access to gold investments.

Lee says he has chosen the fintech route because it is the best way to reach the mass market. “With the internet and technology, there are fewer limitations in reaching out to people. They just need to have a smartphone.”

Further details of the company, such as the total value of the gold bullion it possesses in Singapore and its funders, will be revealed when the HelloGold app is launched, he adds.

“What I can say now is that the company is currently funded by high-net-worth investors. We buy our gold from PAMP and store it through an agent called BullionStar [which provides the vault]. For now, we can have direct access to between 30kg and 100kg worth of gold bullion [depending on demand],” says Lee.

PAMP, which stands for Produits Artistiques de Métaux Précieux, is one of the world’s leading bullion brands, refiners and fabricators of precious metals.

BullionStar is a Singapore-based bullion dealer.

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