Freedom Holding Corp (FRHC)

[Quintessence]

Long interview with Timur Turlov at informburo.kz - here is part of it translated..

https://informburo.kz/interview/timur-turlov-ya-dostatochno-davno-praktikuyus-v-otvete-na-vopros-pochemu-ya-ne-verblyud.html

Timur Turlov is an entrepreneur and financier, founder and owner of the leading public investment company in the CIS Freedom Holding Corp., operating under the Freedom Finance brand, with a capitalization of over $ 400 million. Born November 13, 1987 in Moscow. Married, father of four children.
About the beginning: "For the first six months, we didn’t understand well what we would pay people for."

- Your name often flashes in the media, but Kazakhstanis do not know you very well. Maybe a little bit tell us who you are, where, how did you come here in Kazakhstan?

- Actually, I started our business in November 2008, when the bank where I worked, closed its investment unit in Moscow, and we decided to make our small investment boutique. From the end of 2008 to the middle of 2011, we grew up in Moscow, we got on our feet there, we made some first money.

- When you say "we", are you still talking about Freedom Finance?

- Yes. In 2008, there were six of us there, and for the first six months, frankly, we did not understand well what we would pay people with. A little later, we had a first fairly large client, and then we gradually got to our feet. Since mid-2009, the US market has gone up, and has not stopped for almost 10 years. Of all the brokerage companies, even though we were the smallest, we were the ones who were objectively focused on the American market. That is, all of our competitors gave access to them, but somehow with their left foot and, in general, so that it was for the range. Some kind of "poor relative" has been doing this for them: we seem to be a decent company, we should do that too. And we specialized in this.

And I think that the vast majority of competitors in Russia had a conflict: they learned how to make money well in the Russian market, at some point it was beneficial for them as companies, but this market became uninteresting to customers. The market has ceased to grow, it has been stagnating for 10 years in fact. Customers began to look for some opportunities to earn money, and they began to look for them, including from those who tried to build the infrastructure for the interests of their clients, rather than trying to drag customers to the infrastructure that was convenient for them.

Closer to 2011, when I first came to Kazakhstan, we as a whole were already on my feet, that is, there was already some free capital. We didn’t have such questions as how we will pay salaries this month and next, too, probably. At the same time, we felt very well that we were very small in Russia. This, of course, is also a business scale, when in order to be profitable, in order to be competitive compared to other companies, you still need to be large enough. When you are small, you are less trusted, you have fewer opportunities to give quality service to the client. Therefore, I rather actively thought about regional expansion, where we see an opportunity for our growth and development. We have opened an office in Kazan, our office in Lipetsk has appeared.
About Kazakhstan: "There was no one in the market at all"

- And how did you find Almaty on this list?

- Accidentally everything turned out. I came to Almaty, because, rather, I tried to find some ... I didn’t even open a business here. I came here in May 2011 for the first time in my life, I had absolutely no acquaintances here, they just advised me to meet people and, relatively speaking, to ask for advice. This is all and limited in the end.

We talked, I had a round of talks with one of the brokerage companies here, we discussed joint business with them. The negotiations were quite hard and long. I made a detailed business plan for how we will live. For almost three months we discussed all this, I have already written a detailed “plan to seize the world”, and when they finally told me: we probably won’t do anything, either I didn’t convince them, or they have some circumstances they have changed, or both have happened - I was somehow not ready to retreat. I already imagined what would happen in 10 years, and here they tell me that nothing will happen.

And I also liked it here, I saw some possibilities. Then I was hooked by the phrase of one of my acquaintances that Almaty is such a small Moscow, in terms of the fact that there is a much smaller market, and the cost of entering the market, the cost of fighting for brand recognition will be 10 times less here. While the quality of the market is not much worse.

Almaty is a real decision-making center, a huge number of owners who live here.

I liked the idea, because here the competition is lower. In Russia, objectively high competition, even now in our industry, it is high, and we have also successfully won it all the past few years, but the process was harder there. And here we arrived and were very surprised: there was no one in the market at all. At first I did not understand: why, actually? There is money, there are banks, everything is fine with oil, capital moves freely, people are open, educated, on the whole, everything is not alien to them, they all responded well to it, but nobody did it. Why did it happen, why there are no local players, why none of the local players are trying to actively develop this story?

- Really, why?

- I then found answers to questions, found them in how the stock market developed, how it was regulated, it was very squeezed. And now there is still enough, but much more regulated than the Russian market, for example, in terms of opportunities and many other things. Privatization under a different scenario took place a little bit, and, due to historical reasons, there was no widespread securities market in Kazakhstan, and there were no strong players who would later lobby for some rules of the game that would allow them to make money in this market.

- And now there is such a player, and this is you?

- I do not know.

- But there is such an ambition?

- I certainly want to be one for whom the stock market will be the main business. In many ways, this is very unusual for the regulator now, very unusual in principle for Kazakhstan, because there has traditionally never been a single-line broker, or they were part of a large insurance empire, a banking empire, belonged to some financial and industrial group, and for any of them it was not the main asset. That is, some deputy chairman supervised a subsidiary, he was infinitely far from these owners and such ambitions.

- You told us what the best competitors were on the Russian market. And how did you win in Kazakhstan - due to the fact that no one really was, nobody at all?

- You know, it seems to me that one of the main secrets is that, firstly, our competition, as it was very low for unknown reasons, still remains very low. Now, perhaps, the entrance threshold has become much higher than it was then. But it really seems to me that we were able to build and invest a lot of such things that raise the entry threshold for some players in part. That is, we have invested several million dollars in our IT in recent years in order to build an effective system of internal accounting, online trading, electronic document management with customers. Without making these large enough investments, it was impossible in principle to talk about some kind of wide retail.

The vast majority of our competitors here now open accounts for three days. When we had a national IPO, we opened 1000 accounts per day, and the performance of all our infrastructure systems is now several times higher than any of our competitors. For a very large amount of time, we pumped almost all the money we earned in the West to our local infrastructure, to serve our customers, on some of our own operations in the US market.

We very much believed in the story that the number one broker in the market of Kazakhstan will cost good money, and this is a really cool opportunity on which to make good money.

It so happened that none of our competitors turned out to be ready for this, everyone was focused primarily to, I don’t know, make some kind of major institutional deal, buy bonds at 101, sell at 101.5, earn 50 000 dollars on operations, globally, in general, with confidence to look to the future.

When, in 2011-2012, institutional investors somehow disappeared from the market due to the unification of pension funds, tightening regulation, then we were left with, in fact, only because it made very little money to earn $ 50,000 by reselling some paper. it was hard, but nobody was busy with small retail before, because it was necessary to invest in it for a long time, with some kind of expectation. And we just didn’t know anything else, we didn’t know how to resell a piece of paper at half a percent more expensive, we didn’t know how to make money on just one transaction, so we had to be this independent player who was engaged in private clients in the first place.

- I understand correctly that now the Kazakh part of Freedom Finance is much more than the Russian part? Are you a Kazakhstani company with Russian roots?

- Not really. We now have about 40% of the revenue comes from Kazakhstan, 55% - from Russia. Yes, we had a period when our Kazakh business was more Russian. Now we are again ahead of him, we have built a branch network quite active. Last year, it was like this ... In Russia, we entered the top ten brokers, closed the purchase deal for competitors and still see opportunities for growth.

Yes, we are a company that earns most of its profits in two markets - Russia and Kazakhstan. But I spend more time here, I live here in Almaty, my children go to school here and since 2011 they have been living with me here. I have a full-time permanent residence now.