No sooner had I written "Financial Technology and the Fiduciary Rule," an invitation to the Future of Finance 2016 appeared in my in-box with the call-out that "Technology is about to revolutionise financial services." (Note the British spelling for this Oxford conference.) Based on session titles, attendees will hear about topics such as how technology can:
- Be "used to build trusting relationships with clients" and increase transparency;
- Substitute for "expensive human intermediaries" to lower costs; and
- Encourage the creation of "simpler and cheaper" insurance and savings products.
Increasingly, angels and venture capitalists are waking up to the fact that the global retirement marketplace is big and ripe for innovation. Earlier today, Goldman Sachs Investment Management Division announced its intent to acquire Honest Dollar. According to CrunchBase, this transaction follows a seed financing last fall to further build a web and mobile platform that allows small businesses to cost-effectively set up retirement plans. Expansive Ventures led that round that includes former Citigroup CEO Vikram Pandit and will.i.am, founder of The Black Eyed Peas musical group.
Yet another indication that investors see "gold in them thar health care and retirement plan hills" is a $30 million capital raise for a company called Namely. Its February 23, 2016 press release lists Sequoia Capital as the lead venture capital firm for this round, bringing its total funding so far to $107.8 million for this "SaaS HR platform for mid-market companies."
Interestingly, in articles about both Honest Dollar and Namely, the tsunami of complex regulations is cited as a reason why employers need help from financial technology organizations. With mandates growing and becoming more muscular, no one should be surprised if cash-rich backers write big checks to financial technology businesses. As Xconomy reporter Angela Shah points out, multiple start-ups are "trying to compete for the 80-plus percent who don't offer benefits."
There is no doubt that the competitive landscape is changing and will prompt more strategic soul-searching for vendors and policy-makers alike. I've listed a few of the many questions in search of answers as things evolve.
- Will other large financial service organizations like Goldman Sachs swallow up smaller start-ups? If so, does that change the role of angels and venture capitalists?
- If enough of these companies pop up to serve small businesses and self-employed persons, is there still a need for the product offered by the U.S. government - myRA?
- Will the U.S. Department of Labor fiduciary rule, if passed into law, accelerate the formation and growth of financial technology companies? If so, how?
- Will there be a need for more or fewer financial advisors as the financial technology sector grows?
- Will individuals buy more insurance and savings products? If not, why not?
Life in financial services land will never be dull.