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Oct. 26, 2015
Report: Crowdfunding and Wealth Management 2015

Crowdfunding: a Major Threat to the Global Wealth Management Industry

Crowdfunding

Despite the explosive growth and potentially disruptive impacts of crowdfunding on private banks and wealth management companies, interest in crowdfunding on the part of the wealth management industry has remained very low. This is one main finding of the MyPrivateBanking report “The Rise of Crowdfunding: Threats and Opportunities for the Global Wealth Management Industry”, which estimates that the overall global crowdfunding market will reach $1 trillion by the year 2025.

The MyPrivateBanking report defines and analyzes crowdfunding as the practice of funding a project or venture through many donations (typically small, but not exclusively) from a large number of people, usually raised via the Internet. The funding can be in the form of debt, equity or donations. For this report MyPrivateBanking explored more than 50 crowdfunding platforms that are of strong relevance to the wealth management industry because of their innovative and unique features and analyzed and profiled 14 platform in depth. Service providers and software vendors that are relevant in the crowdfunding space were also analyzed.


Wealth managers fall behind competitors in grasping impact of crowdfunding


The report states that each of the main manifestations of crowdfunding poses different challenges to the wealth management industry. These challenges range from opportunities for fresh approaches to philanthropy and sponsorship provided through donation and reward-based crowdfunding, to the possibility of turbo-charging the ability of cash to generate income in P2P lending and the potential for equity crowdinvesting to work as a new form of venture capital for wealth clients.

In MyPrivateBanking’s view, wealth management companies have taken false comfort from crowdfunding’s reputation for democratizing finance, failing to bear in mind that democratization can provide the wealthy with new options, too; less exclusive ones, yes, but also more profitable or cost effective ones. Although other players in the investment industry, such as brokers and funds, and the family offices show a keen interest in crowdfunding developments, the MyPrivateBanking report finds scarce evidence of any general engagement on the part of private banks and wealth managers.

The possibilities and the dangers of crowdfunding for wealth managers may not have been spelled out but they are nonetheless real. As a consequence, MyPrivateBanking believes that wealth managers are in danger of misinterpreting the situation and see no immediate cause for concern. As the report shows, for example, in the US many equity crowdinvesting platforms target accredited investors (an individual with an income of $200K or more, or investable worth of over $1 million).

Wealth managers can benefit from crowdfunding in various ways – as long as they overcome their fear and aversion

MyPrivateBanking sees the following as being the key reasons for the lack of direct involvement in crowdfunding by private banks or wealth management firms:

  • Fear of cannibalization of their client base

  • Fear of regulatory and reputational missteps

  • An aversion to FinTech and crowdfunding in a conservative industry

  • Conceptual difficulties that make it difficult to give marketplace lending and equity crowdinvesting space in a traditional asset allocation strategy

  • A misconception that crowdfunding abolishes or claims to do away with the need for professional financial expertise

MyPrivateBanking forecasts a substantial and increasingly disruptive potential for the wealth management industry and strongly recommends that private banks and wealth management companies take steps to craft a suitable response to crowdfunding to better serve their clients and protect, or even expand, their client recruitment prospects.

The report details five strategic options each wealth manager has, with varying amounts of room to maneuver or mix.

  1. Hand-holding for clients who wish to engage in crowdfunding personally

  2. Crowdfunding commentary and analysis for clients, including basic education on the topic – e.g. helping clients appreciate the illiquidity of crowdfunding

  3. Fulfilling an investment advisory (discretionary) role for clients in relation to one or more of the main crowdfunding asset classes

  4. Partnering with selected crowdfunding platforms or taking a minority stake in a crowdfunding platform

  5. Creating the wealth manager’s own platform 

MyPrivateBankings regards the dynamic, interactive and confident way in which crowdfunding platforms are able to benefit from their digital relationship with individual members of their particular crowd as a central component of crowdfunding. In consequence, the rise of crowdfunding might not only take away substantial assets under management from the wealth management industry; even more threatening is crowdfunders’ ability to also steal the hearts and minds of wealthy investors. 

Click here for more info report.


In-depth Profiles of Crowdfunding Platforms in the report:
CircleUp, Companisto, Crowdcube, Emerging Crowd, Eureeca, Funding Circle, Investiere, Kickstarter, Lending Club, Microventures, Miteinander Erfolgreich, OurCrowd, Shekra, Ulule.

In-depth Profiles of Service Providers and Technology Vendors for Crowdfunding Services in the report: CrowdEngine, Orchard Platform, Profile Software’s FMS.next P2P Lending solution 

Other platforms and providers that are mentioned in the report: Alternativa.fr, Bankless24, Bondora, Cashare, Daily Deed, DealGlobe, EquityNet, Fuer-Gruender.de, Fundme Securities, Indiegogo, iFunding, InvestX, Kapipal, MyMicroInvest, OneVest, Prosper, Raizers, Ratesetter, Seedrs, Smava, Snowball Effect, SquareKnot, StartNext, Syndicate-Room, TexasNetworks.com, TexasTruCrowd, Zopa.

My Private Banking



Report: Crowdfunding and Wealth Management 2015

Crowdfunding: a Major Threat to the Global Wealth Management Industry

  Oct. 26, 2015

Crowdfunding

Despite the explosive growth and potentially disruptive impacts of crowdfunding on private banks and wealth management companies, interest in crowdfunding on the part of the wealth management industry has remained very low. This is one main finding of the MyPrivateBanking report “The Rise of Crowdfunding: Threats and Opportunities for the Global Wealth Management Industry”, which estimates that the overall global crowdfunding market will reach $1 trillion by the year 2025.

The MyPrivateBanking report defines and analyzes crowdfunding as the practice of funding a project or venture through many donations (typically small, but not exclusively) from a large number of people, usually raised via the Internet. The funding can be in the form of debt, equity or donations. For this report MyPrivateBanking explored more than 50 crowdfunding platforms that are of strong relevance to the wealth management industry because of their innovative and unique features and analyzed and profiled 14 platform in depth. Service providers and software vendors that are relevant in the crowdfunding space were also analyzed.


Wealth managers fall behind competitors in grasping impact of crowdfunding


The report states that each of the main manifestations of crowdfunding poses different challenges to the wealth management industry. These challenges range from opportunities for fresh approaches to philanthropy and sponsorship provided through donation and reward-based crowdfunding, to the possibility of turbo-charging the ability of cash to generate income in P2P lending and the potential for equity crowdinvesting to work as a new form of venture capital for wealth clients.

In MyPrivateBanking’s view, wealth management companies have taken false comfort from crowdfunding’s reputation for democratizing finance, failing to bear in mind that democratization can provide the wealthy with new options, too; less exclusive ones, yes, but also more profitable or cost effective ones. Although other players in the investment industry, such as brokers and funds, and the family offices show a keen interest in crowdfunding developments, the MyPrivateBanking report finds scarce evidence of any general engagement on the part of private banks and wealth managers.

The possibilities and the dangers of crowdfunding for wealth managers may not have been spelled out but they are nonetheless real. As a consequence, MyPrivateBanking believes that wealth managers are in danger of misinterpreting the situation and see no immediate cause for concern. As the report shows, for example, in the US many equity crowdinvesting platforms target accredited investors (an individual with an income of $200K or more, or investable worth of over $1 million).

Wealth managers can benefit from crowdfunding in various ways – as long as they overcome their fear and aversion

MyPrivateBanking sees the following as being the key reasons for the lack of direct involvement in crowdfunding by private banks or wealth management firms:

  • Fear of cannibalization of their client base

  • Fear of regulatory and reputational missteps

  • An aversion to FinTech and crowdfunding in a conservative industry

  • Conceptual difficulties that make it difficult to give marketplace lending and equity crowdinvesting space in a traditional asset allocation strategy

  • A misconception that crowdfunding abolishes or claims to do away with the need for professional financial expertise

MyPrivateBanking forecasts a substantial and increasingly disruptive potential for the wealth management industry and strongly recommends that private banks and wealth management companies take steps to craft a suitable response to crowdfunding to better serve their clients and protect, or even expand, their client recruitment prospects.

The report details five strategic options each wealth manager has, with varying amounts of room to maneuver or mix.

  1. Hand-holding for clients who wish to engage in crowdfunding personally

  2. Crowdfunding commentary and analysis for clients, including basic education on the topic – e.g. helping clients appreciate the illiquidity of crowdfunding

  3. Fulfilling an investment advisory (discretionary) role for clients in relation to one or more of the main crowdfunding asset classes

  4. Partnering with selected crowdfunding platforms or taking a minority stake in a crowdfunding platform

  5. Creating the wealth manager’s own platform 

MyPrivateBankings regards the dynamic, interactive and confident way in which crowdfunding platforms are able to benefit from their digital relationship with individual members of their particular crowd as a central component of crowdfunding. In consequence, the rise of crowdfunding might not only take away substantial assets under management from the wealth management industry; even more threatening is crowdfunders’ ability to also steal the hearts and minds of wealthy investors. 

Click here for more info report.


In-depth Profiles of Crowdfunding Platforms in the report:
CircleUp, Companisto, Crowdcube, Emerging Crowd, Eureeca, Funding Circle, Investiere, Kickstarter, Lending Club, Microventures, Miteinander Erfolgreich, OurCrowd, Shekra, Ulule.

In-depth Profiles of Service Providers and Technology Vendors for Crowdfunding Services in the report: CrowdEngine, Orchard Platform, Profile Software’s FMS.next P2P Lending solution 

Other platforms and providers that are mentioned in the report: Alternativa.fr, Bankless24, Bondora, Cashare, Daily Deed, DealGlobe, EquityNet, Fuer-Gruender.de, Fundme Securities, Indiegogo, iFunding, InvestX, Kapipal, MyMicroInvest, OneVest, Prosper, Raizers, Ratesetter, Seedrs, Smava, Snowball Effect, SquareKnot, StartNext, Syndicate-Room, TexasNetworks.com, TexasTruCrowd, Zopa.

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