In December 2021, Yieldstreet president and co-founder Michael Weisz, alongside Managing Director of Capital Markets, Fahd Basir, joined a panel of financial experts at the ABS East conference in Miami for a lively discussion on a range of topics, including the shifting perspective of consumers and retail investors, investing during a crisis, the influence of technology on access to investment opportunities, and the future of regulations in the finance industry. For those who were unable to attend, here are four key takeaways from the conversation:
Technology, Online Platforms Have Made Investing More Efficient
Speaking to how the investing landscape has changed over the years, Fahd discussed the impact of technology on the ability of financial services providers to create opportunities and make critical decisions throughout the lifecycle of an investment. More specifically, he pointed to how the efficiency of these processes has dramatically increased. “If you were running a multi-consolidation on collateral fifteen years ago, or ten years ago, it would take a couple weeks,” he said. “Today, you can do it in five to ten minutes, and you can do it on your phone.” Additionally, Fahd noted that as technology continues to advance, and access to alternative investments increases, it’s only “a matter of time” before nearly any important process can be reliably outsourced across asset classes, making it easier for investors who lack in-house, specialized teams to help navigate their projects or portfolios.
Massive Liquidity May Not be the Only Reason More Consumers are Investing
While the large amounts of liquidity and support provided by the government since the start of the pandemic have undoubtedly played a crucial role, Fahd suggested that the rising interest in financial markets and alternatives could also be a result of shifting ideas and attitudes about personal finance among consumers. He noted how the saving rates are rising, and that consumers are increasingly less interested in borrowing credit and taking on more debt, especially in a time of crisis. If consumers know that the government will provide backstops to protect the financial market during a crash, as evidenced first by the intervention related to the 2008 housing crisis, and today by ongoing support related to the pandemic, then they are more likely to invest in the market than borrow another credit card at a high interest rate. “Yes, there’s a massive liquidity uplift,” said Fahd. “But at the same time I think people were very worried about what happened in 2008, and there has probably been some readjustment in how [consumers] think about leverage in their daily lives.”
Regulators Need to Increase Access Without Compromising Protection for Investors
On the topic of regulatory progress, Michael noted that there have been significant steps taken to provide consumers with additional access to alternative markets, such as revisions to the accredited investor definition and changes to solicitation rules. However, he believes that much more could be done and at a faster pace. Moreover, consumers have never been more vocal and adamant in their demands to be included, as evidenced by increasingly unified retail investors on social media driving up the price of meme stocks such as GameStop and AMC, or trading in the famously volatile crypto market. At this point, Michael pointed out, “the people have spoken,” and regulators now have a responsibility to allow the average retail investor to access safer opportunities in order to reign in increasingly high-risk behavior. “Regulators realize they need to respond,” he said, “and they need to recognize that we’re probably better off having retail investors invest in private equity [or alternatives], rather than in the next BioTech or some kind of penny stock.”
The Industry Needs More Proactive Regulations, Collaboration Among Investors
From Michael’s perspective, both regulators and the finance industry need to come together to ensure that investors are adequately protected, but this is difficult when regulations are frequently being passed to address immediate concerns, without taking into consideration where the industry is headed in the long term. “I think the challenge that we’ve experienced with regulators is that it’s a reactive body, not a proactive body,” he said. Importantly, however, the finance industry also contributes to the problem by not being open to or encouraging collaboration. “The finance industry as a whole isn’t always very collaborative,” Michael said. “If you really want to think about where regulations should go, you shouldn’t be thinking about your next deal or securitization. You should be thinking about two years, five years, ten years from now, where the world is going to go, where technology is going to go, and how these businesses are going to grow.”
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