Mortgages for `Branch-Never` clients is the next re-bundling item  

`Allocating capital and managing the risk on the debt side of our personal balance sheet is larger, more complex, and determines whether we reach our goals or how far away do we end up. This is primarily where we all need advice (human, bionic, hybrid) in the first place, and subsequently in the investment segment of our finances`

This is an excerpt from a post I wrote nearly 3yrs ago The vertical integration of SoFi has the core entry point right! One of the points I was making is that offering mortgages first and then expanding into wealth management, is the way to go during this digital transformation and cannibalization of several financial products. Simply because the value add of advice on the debt side is significant and easier for the end customer to understand.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

Since then, the digital mortgage market has evolved – US players like Roostify, Mojo mortgages, or ElliMae – and several partnerships have been established. For example, Ally Financial partnered recently with digital mortgage disruptor Better.com; or HSBC with Roostify.

Since then, the market reality is that several Fintechs in the investment part (e.g. robo-advisors) have cannibalized products and services, while increasing customer acquisition costs. As a result, they have been forced to expand their initial laser focused offering. Which brings me to the recent announcement of Wealthfront, the digital-only standalone robo-advisor, that plans to add mortgages to its offering.

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Wealthfront started on the asset side of our personal finances and is now enriching its offering on the liability side. Sofi did the reverse. Wealthfront, however, has been analyzing data for its clients around home pricings and mortgages, as part of their saving goals towards mortgage down payments. So Wealthfront is not starting from zero. They see demand (they always have been) on customers that are `Branch-Nevers` as they call them.

At the same time, Varo Money the mobile-only banking app (with no banking license yet) has been offering unbeatable free checking and high-yield savings accounts, and plans also to add mortgages and more once they get a banking license. Both Sofi and Wealthfront have added cash and savings accounts.

What a mashed-up market!

From unbundling, integrating, then re-bundling and consolidating. Over and over again.

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How innovative can Goldman Sachs be with its planned robo-advisor?

Maybe Goldman Sachs leads the way so that Digital Advice reaches the $1.26 trillion projected by 2023.

The large players are moving down-market, slowly and steadily. Goldman Sachs moved Marcus into their asset management division last year and has just announced that they will launch a robo-advisor with a $5k minimum next year. They acquired early on, Honest Dollar for digital retirement savings and Clarity Money, a PFM app. Both are mobile offerings.

Goldman at a high-level glance

goldman.jpg

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

The details of their planned robo-offering are not known yet and Goldman`s offering with the masses is a work in progress.

 Will Goldman develop a first-class Mobile digital advice app?

 Now that would be a great First in the US market. My intuition tells me that Goldman Sachs will integrate its existing partnerships, like the one with Motif, into this offering and use its existing brand name to build a pipeline of new customers. The partnership with Motif (established earlier this year) aims to launch innovative ETF products and indices based on machine learning and artificial intelligence.

  • Goldman Sachs Motif Data Driven World ETF (GDAT)
  • Goldman Sachs Motif Finance Reimagined ETF (GFIN)
  • Goldman Sachs Motif Human Evolution ETF (GDNA)
  • Goldman Sachs Motif Manufacturing Revolution ETF (GMAN)
  • Goldman Sachs Motif New Age Consumer ETF (GBUY)

Goldman and the newly acquired network of United Capital, are a great launchpad for the upcoming GS down market offering. Imagine it is Christmas next year and your mass affluent dad, aunt, or older friend already banking with GS and or UC, offer you a new investment account at GS which you can be fund with only $5k. Goldman remains a very sticky brand name that is envied by many in the market, and it will become accessible to the masses. The second trick up GS`s sleeve is that their product offering is not only the basic, mass-produced ETFs only but the innovative, in-house branded forward-looking ETFs too.

Smart products via a low-cost offering, by a top brand name provider. And if GS`s offering is mobile-first, then it has a great chance to leapfrog the existing pack.

Resources

https://www.etfstream.com/news/5822_goldman-sachs-and-motif-partner-for-the-next-wave-of-innovation/

 

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Not another Crypto Exchange; by BondEvalue & Northern Trust

  We like We foresee adoption of Blockchain not Bitcoin Digital Currencies not Cryptocurrencies Stable Coins not CBDCs Blockchain not Bitcoin LIBRA not Cryptocurrencies CBDCs from China & the BRICs not the US These are picks of business media talk from the past and the present. As Ajit Tripathi, said to me in a conversation […]

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Transparency, Transparency, Transparency in portfolio performance

Four years ago, I started preaching about Transparency in wealth management. In the Global Transparency movement in Portfolio Performance from the Daily Fintech archives in October 2015, I asked for `…  a world in which Barron’s top advisor annual rankings take into account performance. Believe it or not, right now these rankings don’t include performance […]

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Digital Securitization as a Service, for the Capital Markets Union

In this post, I take a pulse from the securitization markets and highlight one scalable innovation in Europe – The partnership of Crosslend & SolarisBank. According to MSCI, the 2008 financial crisis was a Securitization crisis. I don`t disagree but this fact does not mean that it was the core cause of the crisis. I […]

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Longevity App Breaks New Ground In Australian PensionTech

Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia. Australia has one of the world’s most sophisticated, widespread pension systems. As a result, a plethora of opportunities for startups are now emerging in adjacencies to the sector. A […]

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What has triggered the explosion of payments for order flow? Not Fidelity

The Robinhood effect popped up again, as Schwab slashed its stock commissions to zero and forced TD America, E-trade, Interactive Brokers, Ally Invest, and Fidelity to follow suit over the next few days. Schwab called this the zero commission brokerage war, on CNN. This war is just the beginning of a broader trend that will […]

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Vanguard undercuts Digital only `advisory ` offerings

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019. The Vanguard effect is well known in the ETF market and now it could extend into the digital advisory space. The Vanguard Digital Advisory service is pending SEC approval. Vanguard`s […]

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2 Tug-A-Wars and 3 trends in Digital wealth

Abaka  conversational AI for financial advice I took the rolling escalators to the Gallery at King`s Place where the annual Robo investing 2day conference takes place, thinking about The cash piles that wealthy people are stacking away in the UK market – FFI = Funds Flow Index by Calastone The frustration of the asset management […]

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Amazingly, the SEC may have got it almost right with the Reg A Blockstack token offering and this may define a new innovation capital market

Reg-A-Quadrant.001.jpeg

TLDR. Napster blew up the music business with free and illegal. Then we had low cost and legal like Spotify, Pandora and iTunes. The same is happening to innovation capital. The summer of 2017 ICO, kicked off by Bancor, was the now illegal way to raise a lot of money easily and at virtually no cost. That was a lousy deal for investors and naturally then regulators jumped in.   

This update to The Blockchain Economy digital book covers:

  • What is broken in the legacy innovation capital business
  • Why the ICO went too far in the opposite direction
  • The news about Blockstack and Reg A
  • Reg A Basics
  • Blockstack Basics
  • Jurisdictional competition will continue
  • Context & References

What is broken in the legacy innovation capital business

In March 2017, in Crypto equity via ICO and the other innovation chasm we wrote that:

“Most entrepreneurs understand the chasm between MVP (Minimum Viable Product) and PMF (Product Market Fit). The low cost to build MVP increases supply, but real demand does not change that fast, so lots of MVP ventures fall into the chasm (i.e. they fail).

The next chasm is less well understood. This is the chasm between PMF and Liquidity (via an IPO on the Public Markets and failing that via trade sale).

Today, we don’t see this chasm so clearly because there is a very expensive bridge across it – in a few locations. The very expensive bridge is provided by the big PE/VC Funds.”

Why the ICO went too far in the opposite direction

In 3 hours that shook my world: the Bancor ICO in June 2017 we described Bancor raising over $150 million in 3 hours in an ICO that kicked off the ICO craziness in 2017 when ventures could raise huge sums on not much more than a “minimally viable white paper”. The ICO went too far in the opposite direction – good for the entrepreneur and bad for the investor.

The news about Blockstack and Reg A

The news as reported in many media outlets was that the SEC gave Blockstack the go-ahead to conduct a $28 million digital token offering under Regulation A (which enables smaller companies to raise money from the public with less strenuous accounting and disclosure standards than a traditional IPO).

This is big news because the SEC is creating a new protocol for token offerings under Reg A. This is tokenized early stage crowdfunding. While neither  tokens nor crowdfunding are new, this the first time they have been combined in a global market that US public investors can participate in.

America has been losing ground in crypto as it was not perceived as a friendly regulatory environment. This news is a big win for American entrepreneurs and investors.

Reg A Basics

Regulation A as per the SEC:

“is an exemption from registration for public offerings. Regulation A has two offering tiers: Tier 1, for offerings of up to $20 million in a 12-month period; and Tier 2, for offerings of up to $50 million in a 12-month period. For offerings of up to $20 million, companies can elect to proceed under the requirements for either Tier 1 or Tier 2.

There are certain basic requirements applicable to both Tier 1 and Tier 2 offerings, including company eligibility requirements, bad actor disqualification provisions, disclosure, and other matters. Additional requirements apply to Tier 2 offerings, including limitations on the amount of money a non-accredited investor may invest in a Tier 2 offering, requirements for audited financial statements and the filing of ongoing reports. Issuers in Tier 2 offerings are not required to register or qualify their offerings with state securities regulators.”

Blockstack Basics

Blockstack describe themselves as the” easiest way to build decentralized apps that can scale” and claim over 120 independent developer teams that have built apps on Blockstack.

Like Ethereum and many ICOs, Blockstack is a developer-focussed open source platform. It is the sort of innovation that the crypto community needs.

Jurisdictional competition will continue

In Some Governments Want To Shut Down Bitcoin But They Don’t Know How we wrote that:

“For a long time, entrepreneurs faced competition and regulators sent them the rule book. Regulators were government employees who thought about competition only in the abstract;  competition was something that other people had to worry about.Today, the environment is more fluid as governments recognize the economic return on innovation in terms of jobs and GDP growth. The regulators now face real competition because their political masters have to keep citizens happy and citizens care about jobs and GDP growth. Both Fintech upstarts and incumbent global banks are increasingly mobile; so jobs can disappear fast if regulators get it wrong. Plus, innovation is the primary driver of productivity which drives GDP per capita. Pity the poor regulator who must balance that with protecting citizens from fraud and enforcing existing laws.”

This jurisdictional competition is a good thing because while, the SEC may have got it almost right with Reg A and the Blockstack token offering, there is still room for improvement. If you look at the details, you will see that accredited investors get in early and the public get in later. The public gets in earlier than they do in a traditional IPO, but this is still a two tier market. In a global market with jurisdictional competition, expect big moves by Singapore, Hong Kong, UK, Switzerland the EU and other tech/finance centers.

Context & References

3 hours that shook my world: the Bancor ICO in June 2017.

Crypto equity via ICO and the other innovation chasm

Some Governments Want To Shut Down Bitcoin But They Don’t Know How

Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO of Daily Fintech and author of The Blockchain Economy.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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