If you're wondering about how safe your cash deposited via Pearler is, or what happens to your cash if something happens to Pearler, you've landed on the right article.

Knowing how your money and investments are protected should be a question everybody asks themselves when selecting any financial services provider.

So congrats on asking these great questions! As you’re about to find out, we have structured our platform to remove as much risk as possible for you, our customers.

You also might be wondering what Automate has to do with how Pearler holds your money. The short story is that when we started Pearler, instead of doing things the way they’ve always been done, we imagined the best long term investing process and built our technology platform around that.

When it comes to cash, this means cutting down the steps you need to take to get your hard-earned savings invested. We help you do this with a feature that automates dollar-cost averaging (DCA) in a few clicks, spanning banking and investing.

Pearler's Client Monies Structure

You might be wondering how your cash is held in the time between you making a deposit and then making an investment.

Let's get something straight before we get into it: if you want to build up a large pile of cash and not invest it, there are better places to do that than here. We are all about investing regularly, so to us, it doesn't make sense to keep heaps of cash lying around, whether it's in the bank or not.

Pearler works with third parties who provide a range of payment processing functions to simplify and facilitate your investment decisions and is not a bank or deposit holder. Pearler does not hold any 'Client Money' (i.e. money to which Subdivision A of Division 2 of Part 7.8 of the Act or s1017E of the Corporations Act applies) on behalf of its clients.

At Pearler, customer funds are processed via a Zepto Settlement Account on behalf of our customers. This account structure only processes / holds customer funds, and is completely separated and not commingled with Pearler business bank accounts. In fact, we've chosen to use a different bank altogether for Pearler's operating business (like wages, rent etc).

Zepto utilises a settlement account for the undertaking and processing of transactions. The account is in Zepto's name and held with Zepto’s ADI banking partner, Cuscal Limited, which holds an A+ rating with S&P. Cuscal underwrites our transaction settlement and clearing obligations. Within the settlement account, Zepto provides explicit account demarcation services through the issuance of a unique float account (with a unique BSB and account number) to a Merchant.

Your funds are held overnight (or longer) in National Australia Bank Limited trust accounts held by our financial services licensee, Sanlam Private Wealth Pty Ltd (ACN 136 960 775, AFSL 337927) (Sanlam), in accordance with its AFSL obligations, and we have also appointed Perpetual Corporate Trust Limited (“Perpetual”) as custodian to open a bank account and act on instructions from us in relation to the movement of funds.

What does this mean? Any cash accumulated before you invest or left over for any reason is held in dedicated trust accounts with National Australia Bank until you either invest them or withdraw. In the event of an insolvency, these monies are protected and remain yours.

Pearler works with these third parties to offer a payments and trust account structure that makes your investing experience as simple, safe and cost-effective as possible. We do not charge or pass on any account keeping fees.

If you want to get more technical, our custodian policies & procedures dictate that Pearler will not deposit, move or withdraw any monies from the Client Monies account, except as directed by you in accordance with our T&Cs.

As such, Perpetual's role is limited to holding assets of the trust as an agent of Pearler. Perpetual has no supervisory role in relation to the operation of the trust and is not responsible for protecting your interests. Perpetual has no liability or responsibility to you for any act done or omission made in accordance with the terms of the custody agreement.

Further, Sanlam Private Wealth Pty Ltd (AFSL: 337927), as the licensee for Pearler, holds Professional Indemnity Insurance cover for the activities conducted under its AFS Licence. Pearler also holds its own Professional Indemnity insurance.

This account structure allows us to set up a direct debit or receive instant payments from your everyday bank account to your Pearler sub-account according to the investment rules and frequency you set. The more popular alternative for online brokers - Cash Management Accounts - do not have the ability to direct debit from one account to another. At the end of the day, it came down to automation or not - which made the choice very easy.

But for completeness, we’ve put together a table to show how the two stack up.

What about interest?

Your money waiting to invest with Pearler does not earn you interest. We work with third parties in payments, banking and trading etc to facilitate the Pearler experience, which we hope you enjoy at the lowest cost possible. And whilst we’re always working to improve our product, currently we are not able to deliver our services at our current pricing and generate interest for you at the same time.

Closing Remarks

There’s one final topic we’d like to cover. In Australia, there have been a handful of situations over the years where a financial institution has collapsed under too much debt (or hedging) for complicated trading instruments or simply from doing the wrong thing.

Unfortunately, this has meant client monies have been lost, which you can read about here, here, here and here. Some of these failures have been caused by excessive debt, so whilst we’re on the topic, we are are a cash-funded startup and in true FI spirit, we are #debtfree.

Since then, protections have been put in place specifically to protect retail (everyday) investors from this risk. That's why customer monies now have to be held in a separate account. Now there can’t be any confusion about who owns what money - you!

We take our responsibility seriously and want to make sure our customers are comfortable. If you have any questions, please don’t hesitate to contact us via help@pearler.com or on live chat during trading hours.

If this was helpful, you might also be interested in reading our blog on how Pearler keeps your shares safe.

Thanks for reading,

Nick