the catalyst that will enable crowdfinance to scale

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 Jonesjjones@IRAeXchange.netIRAeXchange.netwww.linkedin.com/in/selfdirectediravisionary

Dara Albrightdsa@daraalbright.comdaraalbright.comwww.linkedin.com/in/daraalbright/

Twitter: @tothestoics