Ready to Attract Millennial Clients? Up Your Game With Crowdfunding

Ready to Attract Millennial Clients? Up Your Game With Crowdfunding

In the words of Steve Jobs, it’s time to “think different.” About technology, about your clients, and about your business.


There’s a lot of change going on in the investment world, and roboadvisors and new DOL regulations are just the tip of the iceberg. Perhaps the biggest shift facing advisors today is the emergence of crowdfunding as a major investing opportunity for younger investors. Whether you know a lot or a little about crowdfunding, now is the time to up your game.

The crowdfunding movement was born out of the Great Recession. In an effort to generate new growth, President Obama signed the Jumpstart Our Business Startups Act (JOBS Act) in 2012, and it revolutionized capital raising for startups. It also revolutionized investing for individuals.

Crowdfunding is currently forecast to account for more funding in 2016 than all of venture capital combined.


That’s a game changer. For advisors, crowdfunding is poised to have a huge impact on your business model—and your revenue—unless you take time now to learn about it and turn it into an advantage before it becomes a threat. If you’re not convinced crowdfunding is coming your way, consider the following:

  • Crowdfunder, “the first truly diversified fund for early-stage startups,” invests in startups backed by top VCs in the index—at their same terms. Once the fund invests, select fund investments are shared with the investor network online. By offering a greater magnitude of diversification than traditional VC firms, Crowdfunder is able to capture early-stage market returns and deliver them directly to investors.
  • On the popular crowdfunding site IndieGogo, Honey Flow, an Australian beehive maker, recently grabbed headlines for being the fastest campaign to reach $1M—and then $2M. With an initial startup goal of $70,000, after 15 minutes on Indiegogo, they'd raised $250,000. They’re currently the most successful crowdfunding campaign ever launched outside the US.
  • At the end of 2015, Fundrise, a real estate crowdfunding platform, introduced its Income eREIT. The response from investors was swift and dramatic. By March 2016, the company had raised $23.4M in settled subscriptions. The company’s goal is to “give everyone the opportunity to invest directly in high quality real estate, without the middlemen.” Today, there are more than 80,000 members of Fundrise totaling nearly $3 billion worth of real estate investments.
  • Crowdfunding site Kickstarter is now launching more books than all but the largest publishers. One of the most notable successes is Rebel Girls, a children’s book that tells the stories of 100 inspiring women by introducing young readers to role models from the Brontë sisters to Serena Williams. One hundred and forty days after launch, the campaign hit $1M in pre-orders, making it the biggest publishing project in Kickstarter’s history.
  • Stratifund provides an independent, unbiased, centralized source of information about equity crowdfunding deals to let anyone invest in startup companies: Without a broker-dealer, and (are you paying attention?) without an investment advisor. According to the company’s website, Stratifund delivers independent research, easy-to-read reports and “all the info you need, with none of the fluff.”
     

What does the recent uptick in crowdfunding platforms and successes have to do with your advisory business? A lot.

Especially if you are hoping to attract and work with Millennials to grow your practice.


According to a 2015 survey by Capital One ShareBuilder, 93% of Millennials stated they were wary of the public markets. They lack trust in the markets and they lack knowledge when it comes to investing in stocks. It’s no wonder Millennials lack trust in the markets -- they watched their parents suffer through the stock market crashes of 1987, 2001, and 2008, and it wasn’t pretty.

Financial literacy is also a problem. But, as with most challenges faced by this demographic, their response is to turn to technology as a safe haven. Keep in mind that Millennials are on deck to inherit an estimated $30 TRILLION, and they’ll be tomorrow’s biggest earners as well. Combine their love of technology, their lack of trust in the markets in general, and their need to invest, and crowdfunding is sure to play a significant role in their financial futures.

As an advisor, your goal is to attract as much of those assets into your practice as possible, and that requires helping Millennials reach their goals on their own terms. How can you add value when Millennials are able to access so much online and, as the crowdfunding websites promote, cut out the middleman? (Hint: That middleman is often you.)

Begin by making it your mission to stay informed about what’s happening in the crowdfunding space. Spend just 30 minutes each week on sites like Crowdfund Insider and the crowdfunding due diligence site Crowdd. Check out the top crowdfunding blogs like Ayudos, Early Investing, and the Crowdability blog.

Perhaps most importantly, have conversations with Millennials about how and where they plan to invest. Then share what you’ve learned and keep your ears open for new information. The more you know, the more value you can add. And that is precisely how every advisor earns the trust—and the business—of the clients of tomorrow.

Bill Acheson
Investing in Life
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Bill Acheson is Chief Financial Officer of GWG Holdings, Inc. Bill is ideally suited to inform financial professionals and investors about specialty finance, alternative inves ... Click for full bio

Cyborgs Are the Future for Advisors

Cyborgs Are the Future for Advisors

Becoming cyborgs is the way to go for financial advisers…blending robotics and humans into one organism.


You see, I am convinced that robo-advice models will succeed and prosper.

I am also convinced that human advisers will succeed and prosper.

I am further convinced that some of each will fail entirely and die, but in Darwinian fashion the most adaptable will survive and prosper. Smart financial advisers will work out how to become cyborgs and build an offering which is a blend of human and machine – or at least their practice will.

Despite the fear-mongering when it comes to robo’s the reality is that there are many great arguments for automated transaction systems, or robotic product delivery.  Cost reduction for the consumer, cost reduction for the practitioner….efficiency, speed, convenience for all….elimination of the frustrating and time consuming service model supplied by the industry to low value transactional customers….and let’s be bluntly honest: some people DO just need a product solution at some stages of their life, and DO NOT need holistic advice at some points.

Robo-advice makes sense commercially, and it can meet a need in life stages planning for many consumers.  It also happens to appeal to a segment of society who are happy to make their own decisions and transact from the comfort of their pyjamas during the ads in their evening television program, and who are unlikely to engage in full advice.  It is worth remembering that this last type of consumer segment is growing at the expense of the traditional intermediated product delivery systems of distribution.

However, machines do not “manage” relationships and behaviour – humans manage humans.  Humans tend to rebel against the concept (or slightest inference actually) that they are being manipulated or are at the mercy of computers and machines.  Machines and automated systems exist for our convenience, don’t they?  Nobody wants a “SkyNet”.

……So the human adviser remains in the equation……

When we strip out all the industry jargon and hyperbole the primary function of a financial adviser is to manage clients behaviour.  We don’t really manage their money – other people do the actual money management. We don’t supply products….we source them from a supplier.   What we do is manage their behaviour and expectations.  We coach them.  Machines don’t do that yet….and when they are able to (and they will be), most consumers will shy away from being managed by a machine.

But we cannot escape those arguments supporting robo-offerings as they make too much sense for clients and for us. In fact I suspect robo-advice will be a very good thing for smart adviser practices.

Believe it or not, I believe robo-offerings can help us get clients.

For most consumers there is a period early in life when their financial advice needs are fairly basic, and also there is a period later in life where all the planning has been done and consumers are moving into “drawdown” territory.  In between those times, life gets somewhat busier and complexity increases substantially.

Advice delivered by humans should be focussed upon the complexity phase.  Apart from the fact that this is the period of a consumers life when there are the most variables to consider in their planning needs, it is also the phase where behaviour management is a distinct help to the achievement of the consumers goals and objectives.  Generally people will only do uncomfortable or new things if they have a high degree of trust and confidence in the person guiding them to do so, and establishing that level of trust – or the bond between two people – is where robo-offerings will struggle to compete.

However, when it comes to identifying a fairly simple need which has a product solution then robo’s will certainly be able to deliver a solution more cost effectively and faster than the human adviser can, who is bound by increasing complexity of their own called “compliance” every time they have to interact with another human being.

The smart adviser will identify those areas of their clients lives and those product solutions which work well for those times and find a transactional solution for their clients to access.  They will build that transactional, no-advice, solution into the service offering that their practice puts into the market.  In other words they will embrace and incorporate robo-offerings into their business model.

Why?

Not just because consumers want them or need them, and not just because it is cost effective to do so.  Not even because we’d like to have a commercial revenue stream which sidesteps the more time-consuming (and therefore labour intensive and expensive) compliance requirements.

The reason smart advisers will do it is because it will help gather the next generation of clients for the firm before the complexity triggers drive them to seek advice elsewhere.


The robo-advice solution caters to those who have an identifiable need for financial services of one sort or another, but who do not yet need holistic bespoke planning.  It is an entry point for consumers to become customers of the firm, and for the firm to then work upon converting those transactional customers into advised clients for the future.

Robotics are a part of our world and our future.  We need to figure out how to make them a part of our business too, but in such a way that our business uses the robo’s, rather than being used by them.  Humans and robo’s integrated into the same service business in order to deliver they type of solutions and assistance that consumers and customers and clients want at different stages of their life.

The future for the financial advisory practice is cyborgs.

Tony Vidler
Development
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Tony Vidler is the expert in professional services on creating strong personal branding and target marketing positioning. Tony has been in financial services since 1990, ... Click for full bio