Embed Size (px)
Citation preview
The Catalyst that will Enable Crowdfinance
to Scale
Crowdfunding USA Conference
National Press Club, Washington DC
May 5, 2016
By Dara Albright, President of Dara Albright Media and James A. Jones, CEO of IRAeXchange.net
Dara Albright
Speaker, writer & influencer on topics relating to market structure, New Issues, FinTech, P2P & crowdfinance
daraalbright.comwww.linkedin.com/in/daraalbright/Twitter: @tothestoics
Presenter
Relentlessly Searching for Catalysts
A Catalyst that Causes a Stock to Rise and Fall A Catalyst that Fuels an Industry
Source: William O’Neil + Co.
KELLOGG COMPANY 1989 NETSCAPE 1995
Catalyst for Market Collapses & Economic Turmoil
• Did you know that in during the roaring twenties:– 60% of cars were bought on installment
credit – 70% of furniture was bought on
installment credit– 80% of household appliances were
bought on installment credit – Between 1925 and 1929 the total
amount of outstanding installment credit more than doubled from $1.38 billion to approximately $3 billion
– The stock market grew 657% as investors raced to invest in companies, that sold products no one fully paid for, on a mere 10% margin
A Tech Bubble or Financial Revolution?
Crowdfinance is a REVOLUTION!
The Catalysts of Crowdfinance
The catalyst that inspired
crowdfinance
The catalyst that birthed
crowdfinance
The catalyst that fuels
crowdfinance
The catalyst that will enable
crowdfinance to scale
The Catalyst that Inspired Crowdfinance
Social Media Redefines Global Communications
It took man a little over 4 million years to develop the written language!
Today, in a matter of just 1 second: • 7 PCs are sold• 9 new people log on to the Internet for the first
time• 25 cell phones are sold • 257 search queries occur• 1,157 videos are viewed on YouTube• 2 million emails are sent
Communications is Advancing at Warp Speeds
Did a Bubble Burst in the Middle of a FinTech Revolution?
NO! It’s merely a sign that the industry needs to explore news ways to scale
The Catalyst(s) that Birthed Crowdfinance
Two Events that Redefined Global Finance
Catalyst that fueled the Facebook buying frenzy
• P2P / Marketplace Lending has been nothing short of a phenomenon
• According to Morgan Stanley, in the US, marketplace loan origination has doubled every year since 2010, to $12 billion in 2014. Meanwhile, the trend is playing out globally, notably in Australia, China and the UK. All-told, such lending could command $150 billion to $490 billion globally by 2020.
• Venture Capital firm, Foundation Capital, predicts that by 2025, $1 trillion in loans will be originated online globally
The Catalyst that Transformed Global Credit Markets
The Catalyst that Fuels Crowdfinance
The Demand for Economic Equality
Catalyst for Increasing Wealth Disparity
Equity Markets are Unjust
Equity Markets are Unjust
STAGGERING FACTS ABOUT UBER:
• Uber is now worth 4 times the value of publicly-held Hertz and Avis combined. In fact, privately-held Uber is valued higher than 80% of the S&P 500.
• Uber raised a $1.25M seed round on AngelList in 2010 at a $4M valuation. Only accredited investors were allowed to participate. A $10,000 investment in Uber on AngelList in 2010 would be worth $127,500,000 today!
• With over $8B of institutional dollars invested into Uber thus far, Uber is one of the fastest growing companies in history. Yet not one Uber share is appreciating in a small retail investor’s retirement portfolio. Not one.
• Uber is not an anomaly. Companies today create value far faster than ever before. Unfortunately, they are creating value only for those investors who the Government deems as “worthy” of accessing growth stocks.
• Small businesses can no longer rely on banks for loans
• With interest rates at historic lows, investors can’t afford to be weighted in traditional fixed-income assets
Credit markets are just as flawed and unjust as public equity markets
“Qualified” Investors Have Been Flocking to Alternatives
Private Credit Can Provide Greater Yield with Less Volatility
A new McKinsey Global Institute report finds it may be time for investors to lower their expectations
Retirement Assets of 100 CEOs
Source: Center for Effective Government Institute for Policy Studies
Retirement Assets of 41% of
American Families
The Inequality of Retirement Assets
“Tough Noogies” is NOT a Solution!
• The best solution that our brightest economic minds have to offer is:
– “Investors simply need to lower their expectations.”
– “People simply need to save more Money.”
The Solution – Democratize Access to Tax-Deferred Alternative Investing
• Legislation– Reg A+– Title III Crowdfunding– Intrastate Crowdfunding– HR 2187
• Financial Innovation– Crowd-centric retail alternative
products
• Financial Technology – Making tax-deferred micro
alternative investing simple and affordable
Alternative investment products AND access to these products have been escalating
Orchard
And now, we finally have a “modern” retirement vehicle for a new FinTech driven
industry
The Catalyst that will Enable Crowdfinance to Scale
Tax-deferred Micro Alternative Investing will Allow Crowdfinance to Scale
CLOUD BASED SERVICES
The scalability of all crowdfinance platforms will ultimately depend upon their ability to penetrate the $14 trillion retirement market!
Cloud-based ISCP™ is the retirement vehicle for the next-generation alternative asset investor
This modern SDIRA can do for crowdfinance today what the IRA and 401k had done for
mutual funds 30+ years ago – allow an nascent asset class balloon into a multi-trillion dollar
industry
History is Repeating
“The best way to predict the future is to create it.” – Abraham Lincoln
James A Jones
Vice President Business DevelopmentIRA Services Trust Company
CEOIRAeXchange.net
Presenter
Linkedin: https://www.linkedin.com/in/selfdirectediravisionary
The Retirement Market
• $14 Trillion - 50 million IRA accounts
• Households $200,000+ own 80% of IRA worth
• Less than 1% are investing through Self-Directed IRA’s
• More than 99% of equity, P2P or real estate crowd funding are investing with tax inefficient cash accounts paying full taxes every year
The New IRA and 401(k) Market
$7.6 trillion in IRAs$450 billion annually in IRA rollovers from retiring 401k’s
Total IRAs savings Total 401(k) savings Total savings in retirement accounts
$6.8 trillion in 401(k)s
Combined $14 trillion in retirement accounts.
For every $1 in a personal checking and savings account, there is over $12 in an individuals
retirement savings account
So What’s the Problem?
• Process: – Technology is based on 40 year old banking legacy IT systems – 3 steps – Open account, Fund account, Investment Direction – 4-6-8 weeks– No integration from Platform to SDIRA Custodian– Two accounts needed
• Pricing: – Manual process is labor intensive– Business model is annual fees (open-$50-100, Per asset $100-495 Per Year, AUM quarterly-$50,
Transaction-$100 Per)
• Promotion: • SDIRA Custodians are “nonfiduciary” trust Co.’s and are PROHIBITED from promoting Client
Acquisition• Assets Under Management:
– Goes to SDIRA Custodian-No RIA’s
• Non-Scalable:– systems are geared to retail account “one-offs”
What’s Out There Currently?
• A “landing page” is not FinTech:– The landing page on the platform captures client data for the platform. IRA holder
must then print out application, transfer and investment direction, mail it to the platform who mails it to the SDIRA Custodian to begin 4-6-8 week process
• Pricing:– some “deals” with platforms (currently less than 10) that will charge $150 – 250 per
asset, if not regular retail pricing
• Promotion: – Two custodians offer website links for their clients which is prohibited and has
resulted in zero net new clients for platforms
• AUM: – Assets are held with the SDIRA Custodian - keeping Registered and Independent
Advisors from participating in client distribution
The IRA Services Cloud Platform (ISCP™) Solution
• White-labeled solution: “Your website” IRA
• Cloud-based API: Your Client NEVER leaves your site
• One Account: Yours!
• Lowest Pricing in Industry: 25 bps or $100 Flat
• Scalable: 250,000 accounts per hour
• Facilitates both taxable & non-taxable accounts: – Both retirement and non-retirement account holding
– Both private securities and publicly traded
As Peter Hinssen explains it: “Organizations need to become networks themselves. It is the only way they will equal the speed of the complex adaptive systems that their
market have become.”
Thank You!
James A [email protected]/in/selfdirectediravisionary
Dara [email protected]/in/daraalbright/
Twitter: @tothestoics
