Thursday, 30 March 2017
Last updated 6 hours ago
Jul 7 2015 | 4:03pm ET
Dara Albright is co-founder of FinFair, a conference on July 29th that will gather Wall Street veterans and FinTech pioneers alike in New York. The new conference centers on the financial innovation emanating out of the first generation of marketplace lending and equity crowdfunding platforms, and the impact of Reg A+, a key component of the JOBS Act, on alternatives.
Finalternatives' Steven Lord recently sat down with Dara to discuss more about FinFair in general and Reg A+ in particular. According to Albright, FinFair will be “the first forum to highlight the modern applications of Reg A+ which are giving rise to a new breed of retail alternatives.”
What is so revolutionary about Reg A+?
Because of the augmented offering threshold and preemption of state blue sky laws, the new Reg A+ exemption has garnered a lot of enthusiasm lately, particularly from Wall Street’s small cap equity underwriters. But what most on the Street don’t yet realize is that Reg A+ is much more than just a vehicle to facilitate small business capital formation.
The fact is, applications of Reg A+ expand well beyond the equity markets. Reg A+ has the ability to take a plethora of illiquid debt and real-estate asset classes and bring them to the masses through securitization. There is an incredible amount of financial ingenuity occurring in this area right now.
Most importantly, by providing retail investors with access to the same opportunities previously only available to high net worth investors, Reg A+ will be accomplishing one of the goals originally set by its sponsor, Arizona Congressman David Schweikert.
What trends are you seeing in the alternative asset space?
Growth in global alternatives has been staggering. Large, sophisticated investors have been flocking to alternatives since the 1990s, but it has only been in recent years that smaller retail investors have jumped on the bandwagon.
According to McKinsey, retail alternative products are about to account for almost 50% of total retail revenues. Goldman Sachs believes that retail alternatives are in the early stages of a 5-10 year growth trend – reminiscent of early-stage ETF growth – and capable of becoming a $2T AUM opportunity.
Whereas first-generation retail alternatives are comprised only of ETFs and 40 Act mutual funds, through “Reg A+ Securitization”, the market is about to experience an influx of financial innovation unlike any we’ve witnessed before. Because many of these new investment products utilize social financing technologies and are regulated under the JOBS Act framework, I refer to this next wave of retail alternatives as “crowd-centric” retail alternatives.
What would fall under the umbrella of “crowd-centric retail alternatives”?
In my view, any private debt or equity structure that uses the modern regulatory regime to convert private instruments into publicly obtainable securities. That means funds, managed accounts and online platforms that provide investors with access to contemporary assets such as peer-to-peer (P2P), peer-to-real estate and peer-to-business debt, as well as JOBS Act inspired equity offerings.
What kinds of financial innovation will be on display at FinFair?
For investors and advisors, FinFair will present funds possessing sophisticated technologies to help investors maximize P2P returns; new tools for financial advisors and RIAs to manage their clients’ P2P portfolios; innovative custody solutions that are allowing financial advisors and RIAs to hold a host of alternative assets under management; and groundbreaking mobile apps aimed at helping the masses invest in their peers and more realistically prepare for retirement.
For issuers and investment bankers/intermediaries, FinFair will showcase new technologies that are automating the way offering memorandums are structured, and the way in which securities – particularly alternative assets – are marketed and served to retail investors.
What does this mean for the future of financial services?
These new advisor tools, investment products, apps and technologies will not only significantly impact the alternative asset industry, it will forever change the face of financial services.
In addition to better aligning the interests of advisors and their clients, this groundswell of financial innovation will open new revenue opportunities for financial professionals across the spectrum. As opposed to losing assets to outside custodians, financial advisors and RIAs will soon be growing their AUM by providing their clientele with higher yielding, less-correlated alternatives. Instead of traditional investment bankers struggling to find a captive investing audience, they will be employing the latest marketing tools and technologies for enhancing deal distribution.
Readers of Finalternatives are eligible to receive a 15% discount off the FinFair Conference. Just use code FINALTVIP when registering for the conference.