Maximizing Strata Returns: The Cutting-Edge Investment Platform

0:00 – Yield Exchange Investment Marketplace Introduction

0:00 Yvette Wu: Hi everyone. So great to be here for the first ever BC Strata Tech conference. My name is Yvette Wu, my pronouns are she/her. I am the CEO, co-founder of Yield Exchange. Really excited to be here today to share more about our innovative platform that you folks can hopefully leverage. And maybe I'll just get into things. So, Yield Exchange. The topic is, how do we maximize your strata funds?

0:27 At Yield Exchange we're essentially an investment marketplace where we help organizations make more money on their investments. So I just want to share a bit more about the problem that our platform solves, and then I'll go into how we address it and how we see it really relevant to the strata space.

0:42 – Why Shopping for GIC Rates Is Inefficient

0:50 Yvette Wu: So I actually come from banking, and I worked at Vancity Credit Union for almost a decade, and worked really closely with the treasury teams. And it was there where I saw just how inefficient the wholesale deposit space really is. Just to paint a high level picture for you folks, and not sure if anyone here has actually shopped around for their own personal GIC investments, guaranteed investments.

1:17 When an organization, say even a strata, has extra idle cash or funds that they want to store in a really low risk, safe investment vehicle like a GIC, what typically happens is, if you shop around for rates you have to do it in a very manual and painful process, where you have to call or do your online web search one financial institution at a time. And then on top of that, if you see some rates that you really like, you'd have to go back and forth and email or call the bank, credit union, to negotiate these rates.

1:56 Because it is such a cumbersome process, what ends up happening more often than not is organizations tend to just go with whatever face value rate their existing bank or credit union offers them. And when we do that, and we don't shop around for GIC rates, you end up actually leaving a lot of money on the table, because there's actually a ton of rate variability across the different financial institutions that are out there.

2:24 – Connecting Depositors With Financial Institutions

2:27 Yvette Wu: So Yield Exchange, we address that pain point by simply connecting the depositor, or the investor organization in this case, directly with the financial institution. You can almost think of us as a dating site, if you will, where we're connecting the two parties directly with each other. So how it works, really high level: say I am Lululemon and I have a one million dollar GIC opportunity. Instead of calling around one financial institution at a time to figure out what the rates are available to me, all I need to do with Yield Exchange now is post the one million dollar GIC opportunity on this platform.

3:18 It literally takes less than 30 seconds. And then immediately all the invited participating financial institutions will get notified: Lululemon, one million dollar GIC opportunity with these terms. The financial institutions will then submit their rate offers, and so Lululemon in this case will see all the rate offers in one fell swoop, so that they don't have to do any of the shopping around. With a few clicks of a button they see all these rates, and then they can lock in on one rate, or even diversify their $1 million into two or three different investment opportunities, in a very easy and seamless process.

4:02 So how is this relevant to stratas?

4:06 – Idle Strata Cash and Audit Trails

4:06 Yvette Wu: Well, what we've heard through Ryan and his team is, many stratas actually, in some cases, depending on the timing of things, you folks might actually be sitting on some idle cash, and it might be actually in a chequing account or an account that's really not making very much money for you folks. So there's this real opportunity to reevaluate where you hold these funds, to maximize on every dollar.

4:36 But then the problem is, being on a strata council there's really not that much time, you're all volunteers most of the time, so that capacity to go out and look and shop for rates and negotiate these rates is very limited. There's also the challenge of having a proper audit trail. So as different council members change and leave and join the strata council, it might be really hard to have a good sense of what were the last deals and when is our cash up for renewal.

5:13 So having that proper audit trail in one place, to have one source of truth, would be really helpful. And then of course, I'm sure you folks have heard of the recent collapse of SVB, and I think the dialogue around how important it is to really diversify our funds and really understanding deposit insurance really plays a role with strata council funds as well. So Yield Exchange, we address all of these items here, and I'll show you how it comes into play in practice with our demo.

5:50 But before I jump into the demo, I do want to share with you some of our existing clients that we already work with.

5:53 – Participating Credit Unions and Municipal Clients

5:58 Yvette Wu: So at this moment we have 20 financial institutions that have already signed on, some of the largest credit unions like Vancity, Prospera, First West, BlueShore, and we have a few different banks that are signing up within the next few weeks. So as we chug along, you're going to see more and more options from the financial institution side of the fence. And then on the institutional depositors, the kinds of organizations that are leveraging this platform, we've been working really closely with municipalities, and I think that should give you that level of trust and credibility in Yield Exchange.

6:38 City of Vancouver, Burnaby, Oak Bay, Whistler, Kelowna, and more that I wasn't able to fit on this slide, are already leveraging this platform to do their shopping around of GIC rates. We've also been very successful with onboarding non-profits, also First Nations communities, startup tech companies as well. Pretty much any organization that has these idle funds that they'd like to move into a low risk GIC type of investment vehicle, this platform is a really great solution.

7:13 Also because it's completely free for you folks. We've stayed financially sustainable through charging the financial institutions a very nominal commission fee, far lower than what the financial institutions are being charged by deposit brokers at the moment. So we're seeing that transfer of commission fee over to you folks, the depositors. And our rates on our platform have been on average 0.5 to 1 percent higher than the market rates.

7:51 So at this point I'm going to share our demo so you can see the platform work live. I just need to share a different screen.

7:59 – Platform Demo: Posting a GIC Request

7:59 Yvette Wu: So I'm going to stop this and then present a different screen here, bear with me. All right, here we go. Okay, so here is the Yield Exchange platform. This is a demo site, so it's ABC Depositor, we put a fake account if you will. But if your strata council were to have an account, this is what it would look like. Before this page you would log in with your email account — it can be a generic email that you set up — and then you have your password, and then it would take you to this main site.

8:43 So on the side here you can see all these different menu bars. We're going to start with post request. No, I do not want to leave this page because I'm already on post request. So we'll land on this page, and I'm just going to run you through what it would look like to shop around for rates. So here on this drop down menu you first choose what type of investment product you want to go for.

9:10 So for this scenario we'll choose a non-redeemable, and it's asking me for the deposit amount, and I'm going to put a million dollars. And then here you select the term length, so in months or days. So I'll select months to make it easier, and I'll say a nine month term. Here it's asking you for the closing date and time, which is essentially, when do you want all the bids in by from the financial institution?

9:39 So I'm going to say I want it by today, by let's see here, by 7:30 p.m. And the date of deposit, I will give a few extra days to transfer over the funds, so by April 5th you will have the money. And then that's it, that's all you need to do to post your request. Now I want to show you how dynamic this platform is, and how it really provides you folks with a very seamless ability to shop and compare for rates.

10:04 – Comparing Terms and Inviting Institutions

10:15 Yvette Wu: So I'm going to click here on this add additional request. And what we found is a lot of our clients will put in the same products. So non-redeemable, just like I did up top here, and put in $1 million over here. Term length, I'm going to change this to six months, and I'll put the same time that I want the bids in by and the same date of transferring the funds.

10:46 Now, the reason I'm doing this, and the only change here is the term length from nine to six, is so when I get the bids in I can actually compare the rates based on the term length. Because what we've actually been seeing over the past few months, given the market volatility, is shorter term lengths have actually been yielding higher rate returns. So it's worthwhile to just test out the market and see what types of rates you get based on the different term lengths.

11:18 Now you can also add more products, say if you actually did have another product. Maybe you want to add a cashable, and you have two hundred thousand dollars, so you have a million and you also have another $200,000 that you'd want to throw into cashable, you can also throw that in here as well. For the sake of this demo I'll remove this product just to keep it a bit cleaner, and we'll just go with these two post requests.

11:46 And as you can see, it literally will take you less than 30 seconds. After this, all you do is you press next here, and then it'll take you to the screen where you get to then invite which banks and credit unions. So you have the option to invite all of them. And again, because this is a test site you won't see the actual banks that we work with, but when you have your proper account you'll see Vancity, Prospera, the 20 financial institutions that are available to you.

12:16 But you can invite all of them to submit a rate offer, or if you have some criteria, or you only want to work with banks and credit unions that are located in British Columbia for whatever reason, or maybe you're looking at only banks and credit unions with a certain level of deposit insurance or the DBRS rating, you can filter by those criteria. For now I'm going to invite everyone to the table, to this bid, and then I press next.

12:51 I get to review the request summary and make sure I put in everything correct: a million dollars for a nine month term, perfect, here's a million dollars for a six month term. And then I click submit, and I confirm that yes, these two requests are going to be put out to these selected financial institutions.

13:11 – Reviewing Rate Offers and Diversifying Deposits

13:11 Yvette Wu: I press okay, and then I wait. And that is all you need to do to shop around for rates. So I'm going to pretend that it's now 7:30 at night and all the offers are in. So on my review offers tab I will see the two products, or the two requests, that I put out. So here I can see the nine month, one million dollar term that I put out yielded a 5.9 percent, was the highest.

13:46 I got six offers total here. 5.9 was the highest and the lowest offer was 5.2. And then really quickly you can see the other offer, the one million at six months, also yielded six offers, and the highest bid was 5.65 versus 5.1. So really quickly here, seeing these two differences, I might just only review the offer of the nine month term now, because I do want to have a higher rate.

14:17 So now I click on view offers. It takes me to this next page where I can now see all the six offers individually, and see, you know, bank one was the one who offered me the 5.9. And then it shows me what the bank wanted as the minimum requirement in terms of investment and the maximum amount, so they're willing to take my full million, or I have to at least throw in a hundred thousand.

14:46 And then when I look at the other ones, bank two also has a 5.85 percent, that's really interesting. So what I can do is actually diversify, like I said, and maybe I'll choose to do five hundred thousand dollars allocated to bank one at the 5.9 percent, and then for bank two, because I already have an existing relationship, or maybe it's because with bank two I want to be able to diversify my portfolio with the deposit insurance, so I'll throw five hundred thousand to bank two as well.

15:18 And then here what's really cool is you can actually see the interest dollar amount that the $500,000 will yield. And up top here you can see a little summary screen of what your weighted average interest is on that one million. So because you're using the 5.9 and the 5.85, this is the 5.88 that you're getting on the $1 million, and this is the total interest that you will be gaining off of this offer.

15:40 – Counter Offers and No-Obligation Withdrawals

15:48 Yvette Wu: As you can see there's a counter offer button here. So how other clients have used this: say bank two is your preferred bank, but you really want this 5.9 because you know that bank one is offering you this. You can actually put in a counter offer and say, I want 5.9, and by this time. So you can put in the time or date that you want to hear back from bank one, and if you have any special instructions you can share that with them.

16:22 Submit, and then again press yes, I do want to submit a counter offer. The bank can then either accept, decline, or put in a different rate if they want. But for the sake of this demo I'm just going to go with the two offers here, the 500,000, just to show you how the rest of this platform works. So I do that, I'm good to go, to confirm this deal, and I press confirm I have selected, and I press okay here, and then that's it.

17:04 You have now locked in those rates. The banks will connect with you to facilitate the transfer of funds. But what's beautiful about this platform again is, you literally only needed to spend maybe two minutes to do all of that other work that would have taken hours of a strata council to facilitate, to go and shop around for rates. The other beautiful thing about this platform is there is zero obligation.

17:31 So say you put in the rates and then you realize, you know what, we actually miscalculated, we don't actually have five hundred thousand dollars. You can always withdraw, and if you click this withdraw button then the deal is off. It's only until the money is in the bank is when it's a finalized deal. So again, this platform, there's no obligation for you to go through with any of the rates.

18:01 It's a great tool, again, to shop across different financial institutions.

18:09 – Q&A: Strata Property Act Compliance and Minimums

18:09 Yvette Wu: That is it from my end, I'm ready for the Q&A section. So if anyone has any questions, let me know.

18:19 Ryan Grant: Yes, it looks like some came in there. And okay, yeah, we're getting a few more.

18:24 Yvette Wu: Okay, so, if we do this as a strata, do we know for sure that all responses will meet the requirements of the Act? We did review the Act and there's nothing in there that prohibits you from investing in a GIC or a cashable, so to our knowledge there's no issues with meeting the requirements of the Act. Is there a minimum amount to invest? There is no minimum.

18:52 The lowest amount that we've seen on the platform so far, it was a hundred thousand. Obviously because we work with a lot of municipalities their deposits are in the millions. But what I find very interesting is, the credit unions that are on our platform, they're also really interested in gaining new clients, so they sometimes will actually increase the rates even more if you are a new member, like a prospective member.

19:18 So there's that. The other thing is, really transparently, I think the lower the amount, potentially the fewer bids you might get through the door. So again, just want to set the expectations. But as we onboard more and more financial institutions and also cash management teams, I think you'll see a lot more activity. But for now, again, there's really no harm in even trying to throw it into the platform, see what types of rates you can yield.

19:49 And you can even compare against, if you are working with a Big Six bank, to even just have that information on hand to know, are they actually giving me a good rate? And maybe they are, and then that's really great information for you that Yield Exchange is able to provide. And maybe if they aren't, which is actually what we see a lot of the time, especially for our startup tech companies, they end up actually opening a new account and forming a new relationship with the other financial institutions that are part of our platform.

20:11 – Q&A: Manager Accounts, Timing and Coverage

20:21 Yvette Wu: Thank you for that question. Okay: as a property management firm, should we set up an account and then facilitate info to strata clients, or encourage strata corps to create their own accounts? Oh, that's a really good question, Jason. You know what, you can actually do either or, and I wonder if it really just depends on the strata corp. If the strata corp is very engaged and wants to be more hands-on, I would say encourage them to sign up for their own account.

20:56 If the property management firm wants to be more involved and support this work, which I know doesn't take very much time but would be a huge value add to your strata corp clients, that's also very possible, because there is this ability to actually log in as a property manager and then have multiple strata corps that you toggle between to facilitate these deals. The strata corp now would have to sign up their own account to give you permission as a property management firm to manage their accounts.

21:33 But feel free to reach out to me and we can work out those details. We've been doing this type of structure actually with fractional CFOs, so it's very similar, where the fractional CFOs hold multiple accounts — if they have one account and then they can toggle between the different clients that they work with to leverage the platform. Okay, what's the recommended amount of time that we should be asking financial institutions to respond to our request by?

22:04 Oh, thank you for this beautiful question. We actually have kind of a tutorial on best practices for you folks, but yes, I would say best practices between a day to three days. You don't want it to be so short, because we've seen people ask within an hour, and if you're in a meeting you're not going to be able to see that notification come through in your email.

22:27 So you don't want it to be so short, but you also don't want it to be too long, because there is so much rate sensitivity that they end up not being able to put in a bid that quickly. So I would say, give it a day or two, three days, and then that's really the sweet spot. Don't ask for a rate to be submitted by a Friday.

22:51 Fridays are the worst day to ask for rates, because it's usually the lowest, that's the trend that we're seeing. So midweek, best timing. And also you can always throw it in, and then if you're not getting great rates and you know that there's going to be another change in interest rates, you can always throw it back in, because you can withdraw your request. If you haven't signed up a credit union or bank for your company, their rates won't come up, because then the strata would still have to phone them.

23:25 Yes, unfortunately the banks that aren't part of our platform as of yet, they won't be able to participate. We are working very hard to bring them on board. So if you also give them a nudge, because this platform ultimately really benefits you folks, the depositors, because it gives you that buying power to really make it open and transparent, a process where you don't have to do that calling around.

23:54 Because they're almost kind of relying on you not to call around for rates. So we have collective power to move these financial institutions onto our platform. But feel free to email me if there is a particular credit union or bank that you would like to see. That will give us some really good data points to also go back to those financial institutions and expedite things. But we've got a few different credit unions that are in contract review stages as well.

24:21 So even if you join now and you don't see your credit union or bank at this moment, we're really confident that you will see them onboarded in the next little while. Can individuals use the platform, or is it business only? Yes, great question. At the current state it's only for businesses, however we are launching what we call the retail, for individuals, in the next six months. So if this does interest you, please send us an email or sign up for our newsletter so we can share back when we do our launch of individual capabilities.

25:06 And I think that is it. Thank you for the questions so much, really good loaded questions today.

25:12 Ryan Grant: I thought we can bring in Craig just to answer a little bit more to the meeting the requirements of the Act aspect, right?

25:17 – Permitted Investments and New CRF Contributions

25:17 Ryan Grant: Maybe you can fill in some of that. Hello Craig.

25:22 Craig Moore: Hi Ryan, hi Yvette. Hey, that was great information. As a property manager it makes a lot of sense to me. I do get asked about rates for GICs, council members ask us. We've used the more traditional brokerage service for that in the past, or honestly a lot of council members, they just take their own initiative and go out and find them the hard way, which is what you describe, right?

25:48 So I can definitely see a lot of value in your service to our clients. I might have to sign up and try and get that Starbucks gift, we'll see.

25:59 Yvette Wu: Please do.

26:02 Craig Moore: That's awesome. Very, very good. With regard to what's permitted under the Act, if anybody wants to go look it up themselves, firstly I strongly recommend that, because there's no way I can describe to you what it says in complete style here. But it is actually the strata property regulation, so you want to search for strata property regulation, and it's section 6.11. The essence of it is, if it's covered by the Canada Deposit Insurance Corporation, or if it's in Canadian funds, there's a really good chance it's permitted.

26:38 There are a number of instruments that you can take advantage of. And what Yvette said before makes sense to me, that it's probably going to be fine, whatever these institutions are offering you. So I wish that all my strata clients had enough money to invest, and many of them do, and many of them do invest it. So there's lots of opportunity there for them.

27:04 Yvette Wu: Awesome. Yes, and one more thing. I know folks are coming from different spaces, you might be on a strata council but you also work in another organization. If you do refer your organization to us, we can also enter you into the draw, to help us amplify Yield Exchange. So if you think this could be something my organization or company should look into, you don't have to follow the link, but just send me an email, make that connection, and we'll enter you into the draw that way as well.

27:35 Craig Moore: Did you say how long you've been operating this business?

27:40 Yvette Wu: So we've been around… our marketplace, the platform, has been live for the past 14 months, and we started out in 2019 doing a lot of the groundwork research, building up the platform, enhancing different features. But yeah, our live in market has been about 14 months, and we're picking up quite a bit of steam. We have over 160 million in posted transactions to date.

28:06 Craig Moore: Wow.

28:06 Yvette Wu: And the rates have been really great, so we're really excited to see hopefully the strata corp space leverage this platform and yield some higher returns, make some more money off of that hard-earned capital.

28:22 Craig Moore: People need it, absolutely. Well, and you come along at a good time, because in November of 2023 there's a new requirement. Strata corporations will have to contribute 10 percent of what effectively amounts to their operating expenses. That 10 percent of that has to be added on as a contribution to the CRF. So that's going to be mandated as of November 2023. So there's going to be even more cash coming into the strata world.

28:53 Yvette Wu: Yes.

28:53 Craig Moore: Sitting idle, needing to be invested safely, needing to have a place to live.

28:59 Yvette Wu: Yeah, for sure.

28:59 Craig Moore: Hey Ryan, were there any other questions for Yvette?

29:04 Ryan Grant: Let me double check here. Oh yeah, there's a couple that just came in. Oh yes, how to contact me.

29:17 Yvette Wu: I believe Ryan can share my email, but it's yvette@yieldexchange.ca. And you can also find us on LinkedIn, happy to connect.

29:29 Craig Moore: You would impress Dragons' Den folks.

29:31 Yvette Wu: Thank you, I really appreciate that.

29:33 Craig Moore: And mind, there's sharks out there.

29:38 Yvette Wu: Yes, we haven't really entertained that, but thank you.

29:41 Ryan Grant: If you did impress the New Ventures BC folks. So that's something viewers might not know, that Yield Exchange and Yvette and her team were part of the New Ventures BC contest, and they won one of the prizes there, which is pretty impressive. It's a tough contest to win.

29:59 Yvette Wu: Thanks for that plug, Ryan. Yes. And one more thing that I'll share: if this topic interests you at all, we are hosting regular webinars also through Yield Exchange. So our next one is April 12th. So again, sign up, or email me and I can send you the details. But we're bringing together a few different credit union leaders, because there's a lot of just unknown ideas around, like, why should I bank with a credit union, is it safe, why is it safer, what is the deposit insurance?

30:33 Because BC credit unions actually have a really great insurance policy where it's unlimited. It's backed by CUDIC versus CDIC, so it's a different insurance provider, and that's why actually a lot of municipalities do diversify their portfolios and have a portion of it with BC credit unions. Anyway, if these topics interest you at all, please connect with me and we can share our regular webinar series with you.

31:04 Ryan Grant: Yeah, we'll also send it out in our newsletter as well, because that's a hot topic, we want people to stay informed.

31:12 Yvette Wu: Thank you so much for having me, this is so fun.

31:14 Ryan Grant: Yes, thank you again Yvette. And now I guess we'll jump over to Jeremy for his presentation on things to know before you order the depreciation report.