How 2016 reshaped financial services for generations to come
Twenty-sixteen will be etched in time as one of the most unpredictable and metamorphic years in our planet’s history. While every fragment of civilization will feel the effects of 2016, the year will leave an indelible imprint on financial services, global political landscapes and mass media for generations to come.
2016 was also the year that the Cubs finally won another World Series and I discovered the video selfie.
Before I underscore how all of these events will have monumental economic implications on 2017 and beyond, let me just take a moment to boast about the accuracy of last year’s predictions.
Last December I forecasted that:
Robo-advisors will find opportunities in crowdfinance – Just as I predicted, ETF-centric robo-advisors made an entrance into crowdfinance this year. In early 2016, robo adviser, Hedgeable, first entered the crowdfinance space by offering its retail clientele opportunities to venture invest through leading equity crowdfunding platforms such as AngelList and CircleUp. A few months later, Hedgeable announced that it will soon be rolling out a peer-to-peer lending product. Furthermore, based on conversations that I’ve had in recent months with robo-advisory firms as well as with companies that develop technology for robo-advisors, I anticipate many more robo-advisors will soon be joining the party.
Retail Financial Product Ingenuity will Escalate – As discussed last year, GROUNDFLOOR made history in late 2015 with its Reg A+ qualification to offer micro-investors small pieces of real estate debt. In 2016, two more companies broke ground in the Reg A+ arena: StreetShares and American Homeowners Preservation – offering retail investors the ability to capture both monetary and social returns through micro-investments into private businesses as well as individual mortgages, respectively. Companies like these are helping to inspire a new generation of retail alternative products. This type of investment product ingenuity is about to spread well beyond online platforms and marketplaces. I predict that any financial services business involved in the production or sale of alternative securities will soon look to expand distribution by taking advantage of this modern regulatory framework.
Straight Equity Title III Offerings will Fall Flat – Indeed they have. According to NextGen Crowdfunding, a leading provider of crowdfunding deal data, investors have committed to invest slightly more than $15 million into Title III equity crowdfunding campaigns during 2016. $15 million equates to approximately 60 Hillary Clinton speeches or the amount that the U.S. national debt grew since you started reading this article. $15 million won’t even begin to scratch the surface of fixing our economic woes. To put it bluntly, $15 million is not an industry – it’s barely even a house in the Hamptons! Unless and until more creative hybrid financing structures are employed for Reg CF offerings, the market for Title III Offerings will remain insignificant.
Reg A+ “Testing The Waters” will Call Attention to Serious Title II Crowdfunding Flaws – While no one really cared much about this issue in 2016, I do believe that the considerable disparity between total “indications of interest” and the amount of funding actually raised will eventually lead to regulatory amendments. It is completely misleading for a company to “advertise” that it has garnered sizeable funding interest without ever having to notify the public that it failed to raise even a fraction of the amount.
The Crowdfinance Playing Field will Undergo Leadership Change – Wow, was I right about this one! Industry leadership has begun to undergo significant change in 2016 – particularly in marketplace lending. I stand by my statement that, “New leaders will rise. Some unexpected frontrunners will fall. The businesses that will best be able to oblige the retail customer, adapt to regulatory changes, and penetrate retail’s $14+ trillion retirement capital will prevail.”
Hoverboards will Disappear from Toy Store Shelves – Uh, I meant to say Galaxy Note 7’s will disappear from the shelves. Yeah, yeah, that’s the ticket. (In the era of “fake news” this totally passé catchphrase deserves to make a comeback).
While some of my last year’s prognostications have yet to fully reach fruition, I’m still standing by all of my 2016 predictions. I’ve come to realize that predictions, much like karma, operate on their own timetable. Even some of the prophecies of the great Nostradamus were a year or two off. And, let’s not forget that Robert Zemeckis was just one year too early in forecasting the Cubs World Series victory.
Speaking of which, you are probably wondering what the Cubbies winning the World Series and video-selfies have to do with the future of personal finance anyway.
A lot. Maybe even everything.
The Cubs World Series win and video selfies are empowering underdogs everywhere. If the most mocked team in the history of professional baseball can win a World Series and amateur videographers can become universally recognized broadcast journalists, then long shots everywhere can achieve astonishing victories. Non-politicians can win presidential elections. Non-lawyers can prevail in litigation. Small businesses can access capital as freely as large corporations. And primarily due to crucial advancements in micro-investing technology, even investing novices will be able to outperform financial experts. At long last, the little guy can have just as much of an opportunity to create wealth as the George Soros and Warren Buffet ilk.
This brings me to my bold 2017 predictions (or as Ron Suber would likely call them “Big Hairy Audacious” predictions).
Underdogs across the land will triumph in 2017 – The Chinese predict that 2017 will be the year of the rooster. I disagree. I believe that 2017 will be the year of the Rudy.
The broader markets will correct – I foresee the broader markets headed for a crash – triggered primarily by manipulators, speculators and years of unsustainable monetary policy. Our public equity markets have been artificially propped up by policy for far too long. America simply can’t keep lowering rates and printing its way to prosperity. Interest rates have nowhere left to go but up, particularly if Trump makes good on his economic plan and we see some real economic growth. I foresee rate hikes leading to a stock market correction. Although it may be a short-lived correction, those who are well-diversified and have allocated some capital to less volatile, less correlated asset classes, will be better able to weather the storm.
The face of financial media will Become Unrecognizable – In 2016 the established media awoke to the revelation that it no longer holds the relevancy that it did in previous generations – something housewives on Facebook have known since about 2008. Although it tried hard not to accept it, traditional media has been hemorrhaging influence for quite some time now. Just like how the video killed the radio star, how Napster crushed the CD, how Netflix annihilated Blockbuster and how Amazon overtook Barnes & Noble, communications technology is on an unstoppable path to demolish mainstream media. While bloggers have been gaining prominence for years at the expense of print media, it will be the video-selfie that delivers mainstream media its final blow. Financial media is no exception. The 2016 U.S. presidential election established social media – not television – as the dominant medium. Clearly, more people tuned into Infowars than to Rachel Maddow. If the video selfie can help influence a U.S. election, its impact on financial services will be colossal. Expect financial content to become edgier as well as more engaging, encompassing and interactive. Expect new financial voices to emerge and gain prominence. Most significantly, expect these new financial media players to forever transform the way people invest, where people invest and how people invest.
FinTech will Expand into Older Demographics – I see countless FinTech business plans. Most of them are loaded with statistics on millennials, ideas for targeting millennials and even pictures of millennials. Yes, many of us industry folks are well-aware that millennials prefer having a root-canal than going to a bank. However, FinTech is not a millennial-centric market. I predict that 2017 will be the year that FinTech crosses demographical thresholds. I expect that older demographics will start incorporating FinTech into their daily routines. As a result, I envision more FinTech innovation being directed towards developing products for other generations, particularly retirees.
The U.S. retirement infrastructure will begin to undergo monumental transformation in 2017 – The $14 trillion retail retirement industry is on the cusp of great transformation. Thanks to the progression of FinTech, RegTech and AltTech, the retirement industry is about to become fairer, simpler and more inclusive. Expect regulatory and technological innovations to be introduced that will unwind a broken and unjust retirement system. Expect retirement plans to become more consumption driven than employment-based. You can also look forward to seeing the mass adoption of game-changing financial products that will give everyone – including present retirees – a fighting chance to prosper throughout their senior years.
The story of financial services is unfolding and it is growing more fascinating by the minute. And I am truly grateful to be alive at this particular moment in time to witness it firsthand.
Anyone who has read my previous year-end articles knows how reflective I tend to get as I approach my Christmas Eve birthday. And this year I am especially pensive given the fact that I am turning 29 (again) and that mercury is in retrograde and that Uranus (pronounced: “Your Ron Issss”) is, well it is somewhere in the universe doing something to affect my mood. Whenever that happens, I tend to seek inspiration in a poem, a lyric or even in just one simple word.
It is for this very reason that I subscribe to dictionary.com’s word of the day. On December 16th, dictionary.com’s word of the day was “hotsy-totsy” and it means, “about as right as can be”. Because I vowed to find a way to incorporate this quirky “makes-you-feel-like-skipping” word into an article, I would like to simply conclude by wishing everyone a joyous holiday season and a very hotsy-totsy 2017!