Outlook on Artificial Intelligence, Blockchain, and Investing Trends
2017 was a year in which we continued to see major paradigm shifts in capital raising as institutional quality investments became more accessible online through alternative investment options, as investment platforms leveraged various regulations and technology to support fundraising activities, and as investment advisors received a marketplace shake up from the US Department of Labor’s Fiduciary Rule, which could significantly change the game of investing in the years to come. In fact, this game changer may actually come sooner, rather than later since the SEC recently stated it is now working on its own rule to drive more transparency. It’s no wonder that alternative finance, and the rules that go along with it, are anticipated to be a dominating force this year.
As we all look with great anticipation towards the rest of 2018, now is the perfect time for investors and fintech executives to take note of key trends and insights that could equip them with facilitating successful fundraising activities in this new year ahead. With this in mind, below are some Predictions & Pitfalls In Finance & Investing for 2018.
No Recession This Year: While concerns about a market downturn or bubble are increasingly discussed, trends and key indicators actually show that the world of finance will remain steady and poised throughout 2018. Key factors like a strong housing industry, a high-performing stock market with stocks surging 18% year-to-date, and a strong economy have both enterprises and investors looking forward to a robust new year. Additionally, investor allocations to income-producing real estate as a hedge against new stock market highs should grow by about 5%. Tax changes will alter the organizational vehicle in which investors may hold real estate, favoring pass-through vehicles like LLCs over partnerships or corporations.
Investing Uptick In Less Volatile Assets: The recession may not impact us in 2018, but at some point experts say the market may turn again in 2019 due to impending tax changes and due to motivated spending today on capital goods, which is predicted to taper in 2019. At the same time, the Federal Reserve Bank is coordinating a wind down of support for the debt markets with the European Union and the Bank of Japan. Less stimulus means gradually higher interest rates, which could prove to increase capitalization rates and in turn lower asset pricing among riskier real estate assets but favor well-positioned core assets. Investors seeking stable cashflows along with appreciation will continue to look to strategies that offer recession-resistant assets for their portfolios, like income-generating commercial real estate. Moreover, institutional-quality real estate offerings will become more accessible to both accredited and retail investors in 2018. With the recent adoption by KBS — the 11th largest real estate owner in America — of a direct-to-investor distribution channel named KBS Direct. Now that the dog has seen the rabbit, other institutional quality sponsors are now in the chase.
The Blockchain Phenomena Will Continue: Blockchain finance startups raised approximately $240 million in capital in the first half of 2017 alone, so the trend of investing in and deploying blockchain solutions is anticipated to greatly increase as we continue into 2018. Blockchain allows for payment transactions to occur without the need for a trusted intermediary, speeding up financial processes and reducing paperwork and operational costs. Moreover, for business clients the technology allows them to enjoy a reduction in settlement cycles to free up working capital that provides them with access to liquidity they can more readily use.
Artificial Intelligence Will Still Be A Disruption. Since AI is able to automate a number of mundane tasks for Registered Investment Advisors (RIAs), banks, and other financial organizations, it will continue to be a game changer this year. AI will also be more greatly embraced this year as financial reps will better understand how it can improve their jobs, and, not “remove them from their jobs”. In fact, new AI driven technologies, like the ones being implemented by Wrench.Ai, are currently underway that will not only help financial reps, including RIAs, to be more informed and educated about their clients, but will also help them make their personal interactions with clients more meaningful and impactful so they can do an even better job at closing more leads. In general, the AI market continues to look very promising with one statistic showing that AI will surpass $100 billion by 2025. (Source: Constellation Research)
No More Hidden Fees for Investors & Greater Transparency: While the DOL Fiduciary Rule requiring more transparency of upfront commission fees has been delayed, it’s by no means a denial, especially since the SEC is working on their own rule. In fact, even prior to the Fiduciary Rule passing, more financial organizations are starting to drive additional transparency with their investors and are even removing upfront commission fees from the investment process altogether. This marketplace shift will increase investor confidence in 2018, which is critical since trusting the organization that’s facilitating the investment is a top concern for many Millennial investors.
More Access To Higher Quality Deals. Crowdfunding, along with other online investment portals, has opened doors to all types of investment opportunities. Which is why this year the industry will continue to see a major shift in digital investing that will afford investors of all types to gain access to deals that were once only available to the wealthiest players. Now the everyday “Joe” and “Jane” investor can have their money work right alongside the investment dollars of people like the Bill Gates of the world and be part of the same high-quality deals that typically have more lucrative ROI.
Online and Alternative Investing Will Remain Strong: The amount of investors using online investing and alternative options will continue to remain strong, especially for both Baby Boomer and Millennial investors. Online investing exposes investors to a larger number of companies driving innovation, and, many online investors are starting to realize an ROI from their online investing activities. In spring 2017, the number of people who lived in a household that used an online investing/stock trading service within the last 12 months amounted to 15.79 million.
Ultimately, as we all continue to move forward in this new year ahead, it’s no surprise that digital solutions, along with industry regulations and the new tax laws are all slated to have a major impact on the world of investing and finance. However, by leveraging these trends and insights, investors and fintech organizations, can prepare themselves now to better navigate the ever-changing marketplace, so they can equip themselves to make wiser finance decisions.