SANTI4 - AI IMPACT ON FINANCIAL SERVICES

Greg Stewart: to No Free Lunch, Africa's freshest business and tech podcast with me, host, Stewart. Today talking to Daniel Mikaali. the founder and CEO of a brand new investment company in South Africa, Santy4. Daniel is a seasoned South African financial services executive with over 25 years of experience in the investment and wealth management industry.

Before founding Santy4, he spent more than two decades at Silica, leading ⁓ South African investment and administration technology platform and previously worked at 91 Asset Management. Welcome to NoFreeLunch, Daniel, and congratulations on the launch of your new company today. Daniel Micali: Thank you Greg. Thank you.

It's good to be here. Thanks. It's great to talk to you. Greg Stewart: so Daniel, ⁓ us a bit of a background.

You've a long ⁓ and successful career in traditional investment administration environment. What ultimately pushed you to leave and build your own new investment platform, the SandyFall? Talk to us about the challenges and opportunities that you recognized. They were mostly that made you see, well, this is a big enough ⁓ opportunity or gap in the marketplace for us to do something fresh and new.

Daniel Micali: Thanks, Greg. Yeah, so thank you for the kind introduction. you said, ⁓ background was really spent more two decades building out ⁓ a and business that really serviced the investment management platform and admin market, not only in South Africa, but also abroad. We built a business that the time that we left, we were servicing three trillion rands worth of assets in South Africa, the UK, the Channel Islands, and other parts of Africa.

And it was a good story, et cetera, and so forth. We sold that business onwards. I then left after the sunning of that business. And during that time, did some various consulting, advisory work, but had this little itch.

at the back, know, with technology and so forth. and like everyone else, I suppose in the world, chat GPT got launched and AI got launched and copilot and started coming to the markets and really started to think, about how AI can change the operating model of investment administration, I first had experience showing a South African-built or an African-built financial technology platform can compete globally. And what I started to see was lot of international companies coming into the South African space and struggling to adapt on some of the legacy technology that was really in place, struggling to change.

And really, the story begins together with my partners and so forth, started looking at, well, Greg Stewart: Yeah. Daniel Micali: What could we do? we build using this technology? ⁓ the chat interface is, ⁓ I suppose, and it helps you review emails and so forth.

what was really intriguing to us was the use of these LLMs ⁓ in the way that they could actually fulfill work and actually do work. And that really started to make us think, if you look at the industry as a whole, across the value chain and so forth. Investment firms are under pressure reduce costs, manage more regulation, launch products faster, service clients better, et cetera. But many of them are still relying on disconnected systems, manual admin processes, And really, if you look at that, ultimately, what does that mean?

Is that every rent that is spent on inefficient administration in the value chain, ultimately, Greg Stewart: Yeah. Daniel Micali: costs of the investor at some point. And our focus was in saying, you in terms of a bigger purpose, how do we reduce that cost and the friction ultimately in the investment value chain that there is value for firms to offer better value to customers. That really was the start of the genesis really of this product and this capability.

It was, would say then, Greg Stewart: Yeah. Daniel Micali: You know, we had this idea and we started piloting, And then towards the end of last year, we started working quite closely with Prestion, investment management. ⁓ They invested heavily in technology. And it was at that time we decided together with Prestion to create a new company that would really be using AI the core.

So the way that we develop our solution, how do we create product and how do we then ⁓ deliver a to clients and to the market. that ultimately achieves that objective of reducing manual, keeping control, reducing risk, and improving compliance across the value chain for those clients. Greg Stewart: And just in terms of your start of this, spoken about the 720 billion rands under asset administration that you've started off with, with quite an ambitious target to hit a billion within a year.

think it is just a trillion, yes, not a trillion within a year. Daniel Micali: A trillion, another trillion. sorry, a trillion. Yeah.

Greg Stewart: with that big start, mean, is that just from Precient or have you got ⁓ an of clients that you've already pulled on board already? Daniel Micali: So that initial 720 has come through present. ⁓ I said, just launched the business now, basically in April, and we have gone to market. ⁓ are that will surpass, actually, that trillion mark.

⁓ We already have a of roughly about 1 and 1.5 trillion. ⁓ And that's just within current context, in the South African context. And we know that.

This product is not only constrained to the boundaries of South Africa. If you look at our current jurisdictional footprint already that we're running on the platform, we can service investment products in Ireland, we can service products in Botswana and Namibia, as well as then obviously South Africa. And when I say we can, I mean that those are live today. And why does that matter?

Is that it demonstrates the ability... for us to have a single platform that can be multi-jurisdictional, multi-currency and can take care of regulations across multiple jurisdictions. And I think that... No.

Greg Stewart: It's an important thing that, to interrupt, but it's a really important thing. for startups and fintechs and that sort of thing, that ability to go across borders in the financial environment where you've got a lot of regulatory, hoops that got to jump through to demonstrate that upfront is actually quite important. So congratulations ⁓ on that start. think that's really good Daniel Micali: Absolutely.

Greg Stewart: opportunity as it is now to enable you to scale future into other other areas. Daniel Micali: Thank you. I couldn't agree. You know, the big story has been there have been international players that have come into this market that have struggled immensely because they might work in one jurisdiction.

And I think, well, if it's good for that jurisdiction, it must be good for South Africa with perhaps thinking that South Africa is a simple market, not realizing that we actually have one of the most complex. markets when it comes to investments and the way that we manage those types of investments and our tax rules, et cetera, and so forth. So for us, what's important is being able to demonstrate that for over two years, we've been able to support these multiple regulatory environments, whether it's being from a KYC and onboarding perspective right the way through to reporting to regulated stakeholders like tax authorities, and so forth.

big milestone for us. the AI, what the AI shows us is that this isn't just an AI story, This is more around how do you help firms operate more intelligently? Our whole thing is around AI doesn't necessitate removal of people. You still need.

the control. So it's not there to replace the control, it's there to improve the control, the speed and the scalability. And that's important to us, so when we've designed our systems, we ensure that we still have the ability to for humans to have input and have control and oversight in terms of what the platform is. Because you see a lot of stuff the market that will talk about, everybody losing their job and so forth.

And we're not saying that we're saying what we're doing is we're actually helping skilled workers. actually perform at a much higher productivity. Greg Stewart: Yeah, it's an interesting debate, that whole thing about the jobs. And I actually don't want to get into that discussion now because it's a bit of a minefield.

But I think that there's obviously going to be job losses on AI overall. I don't think anyone can deny that. I do that the ⁓ big for companies to do today is to ensure that you spoke about having the right skilled people. And that is ⁓ a huge issue at the moment.

But I want to talk a bit about that technology. And you spoke about, the optimization that your system brings into these ⁓ organizations and where they've done things, perhaps even manually. Obviously, there's ⁓ great improvements that one expect them. But ⁓ talk to us a bit about what is the edge of your system and has it demonstrated the ability to reduce bottom line costs ⁓ to a patient as an example.

Daniel Micali: Yeah, so the edge, I suppose, to our system is what we've done is we've essentially taken all of our experience. And so my partners have also decades of experience within this sector. And we've looked and we've studied, you know, what does an operating model typically look like in these environments? What are the functions that typically that occur in those areas?

And then using a multi-model approach where we've used different AIs and different models for certain functions, we've managed to create essentially this platform that then uses skills that we've developed to perform those tasks within each of those models. And that, suppose, is what I think is unique. It's not taking one model and saying, do everything and, you know, standing the risk of getting something done and so forth. We've actually gone into the detail and to find a level instead of micro level to say this is what needs to be performed and how do you need to perform it?

And then how does that get managed and designed then with a human aspect overlaying that? that is really, I suppose, we've designed this product specifically for investment administration within the jurisdictions that we service. And these models are basically using the skills that we've developed to perform those tasks. And what does that mean?

It means into something that we term as non-human speed. the at which these models can operate on is incomparable to what a human can ⁓ But it's really work that is monotonous, know, that is, looking and checking and so forth and not necessarily work that people want to do. People want to do stuff that way they can apply their minds and then interpret things. And that's within the AR works together with the human aspect and to flag out things that potentially, have high risk, maybe need to be flagged, maybe need to be more interrogated, And often what you find in most models, ⁓ models, Greg Stewart: Yes.

Daniel Micali: is that there's a system that's recording how much is Greg invested, how much is it worth today, And then there's some sort of AI bolt-on. This isn't a bolt-on. This is actually one system that is integrated that does everything from beginning to end. Greg Stewart: That's an important point.

I've actually recently had a conversation on one of my other podcasts where we spoke about the whole implementation of AI and building from ground up. that what this whole bolt on thing is actually a headache. that a lot of companies are not doing is re-imagining their entire organization, how the organization should actually be now operating in terms of AI being a part of that operation, as opposed to just something you're trying to bolt on. So in terms of what you're doing, I mean, you're offering the service.

I'm imagining that, um, it's a full service where you can onboard the entire admin operation for. an insurance structure. ⁓ Daniel Micali: or an SM manager or a LISP, exactly. Greg Stewart: so.

⁓ how is your experience, what has your experience been? Will it still require those people to stop and think how they now operate? And how will you be managing that journey and that transition in the clients that you're offering your service to? Daniel Micali: Yeah, it's a very good point.

And I don't think it's even necessarily constrained to our industry. think, and you've just highlighted it there, is that many companies are struggling with this idea of how do we put AI in? But actually, think fundamentally, what you've got to do is, with the opportunities to rethink what actually can be automated, what should I retain? Greg Stewart: Mm.

Daniel Micali: and how can technology help us do that? Because in our past, and the business I built for, part of the building for over 20 years was, you outsource it to a large provider and that becomes almost their problem. But now what you've got is the opportunity with this technology really to look at how AI automation, digitization changes what your operating model looks like, how your clients engage with you. and how can you service them better and more efficiently?

then you can decide, okay, what do I want to retain and what do I actually want to outsource and where do I want outsource it for? Now, we still think that outsourcing does make sense in certain cases, but in terms of the clients that we engage with and some of those outsourcing providers, it's around how do we make them better businesses? How do we make them rethink the operating model? And so our first step, in our process is to take their legacy model and help them design what a future ready model can be like.

What are the products of the future? What are the types of clients that they want to engage with? know, many of the younger generation, ⁓ crypto to their investments now. And you've seen already tokenization of shares, you've seen funds, ETFs, et cetera.

starting to come into those platforms, how do you target as an investment admin provider into those channels? How do you connect into them? And how can we use this technology to allow you to do that? And that's really I the first thing that we do in terms of helping them get to that.

⁓ What also done though, is because of the capabilities and because our technology is brand new, if you compare it to what's out in the market. is it allows us to re-platform a lot quicker than the traditional outsourcing providers or technology providers that have been in the market. And using AR then to assist us in managing that migration and typically these projects have associated with large costs, long timelines, and so forth. And what we're able to do is we're actually able to provide a quick...

point that we can actually show those organizations what can be achieved and then it's around saying how do we get there in terms of the target state that we've built together. Greg Stewart: Daniel, very interesting. And just as a last question, let's look ahead. If I had to say to you, ⁓ to five down the road, what are the that you're in the industry, perhaps in investment environment, ⁓ perhaps within in Africa itself?

And where is Sanity 4 going to be in three to five years time? Daniel Micali: Okay. So, I mean, I think the industry is going to start to move more more to ⁓ a more broader product set. So I think customers, ⁓ my point earlier, you know, are going to look for different types of asset classes to be able to invest into that.

Customers will demand more personalized investment solutions. It won't be kind of a one size fits all and everybody goes into that. ⁓ What we're looking at, certainly from a short-term roadmap, are things like private markets. We think private markets become increasingly more retail.

I think within the African context, it's a huge opportunity. ⁓ are many key people within the South African market that are starting to say, how do we do that? And you look at the growth that's been achieved internationally. Greg Stewart: Yes.

Daniel Micali: You look at the likes of BlackRock and their view much of the market is still private versus public, We think that this is an asset class that over time people will want access to. So we need to make sure we can create the foundation for that. Model portfolios, where you can combine any asset into that and you can manage that asset as a manager. Another one would be tokenization.

So we think... probably correlated more to the profit market side. We think tokenization was playing more an increasing role within that. And then I think more around cross border investment structures.

In South Africa, we're limited to a relatively small universe by comparison to international and global standards. We know that there will be continued increased demand as there is today to get access into those structures. And we need to make sure. Greg Stewart: Hmm.

Daniel Micali: that our platform can adapt quickly to meet those challenges. And we believe our platform is built for that kind of future. Ultimately, then, Greg, his kids, his grandkids, will have the ability to choose one investment that can go into ⁓ anywhere the world. And our technology enables platforms to do that.

Greg Stewart: next time. Well, it certainly sounds exciting. once again, ⁓ on the new venture ⁓ ⁓ you every success. And you joining us on No Free Lunch.

Daniel Micali: Thank you. Thank you, Greg. Thanks for having me.