I hope you’ve had a good week and are looking forward to the weekend. A few stories from this week:
GAMES, INVESTING AND THE YOOF
Gamifying investing can help younger clients. That’s the assertion of a piece published this week in FT Adviser by a contributor from broking firm Willis Towers Watson.
The argument runs as follows: gamification techniques can increase trust in and education around investment; they are also fun, which is important for millennials.
By gamification we’re not talking about the big-budget graphics of modern triple A video games, but, rather, a focus on satisfying the reward system in our brains. It’s about using techniques that motivate appetitive behaviour – encouraging, testing and promoting an understanding of your appetite for investment and its inherent risks, says the author. One example is highlighting the age at which you can retire, based on the inflows, outflows and other lifestyle factors of your twenties.
Arguments for gamification touch on improving user experience and widening access – no-one is going to argue that technology, with its capacity for closing information asymmetries, will make investing worse.
But it’s also a reminder that barriers to investing, and financial inclusion more widely, run deeper. On the provider side, despite the work of fintech firms, everything from managing a stocks and shares ISA to the jargon providers use remains needlessly arcane. And if you are a millennial, your shortermism is likely premised on a sense of economic disadvantage – a housing market starved of supply and an ongoing pay squeeze meaning you can only afford a shoebox by the time you’re 30.
Distributed ledger technology will continue to widen access to financial markets, via alternatives to fiat currencies and things like utilising smart contracts to enable better post-trade activities.
And there are plenty of other innovative approaches out there: if you have a moment, check out Freetrade, which offers commission-free stocks and shared trading. Or head over to Reddit’s Financial Independence community – a crowd-sourced bunch of mostly millennials sharing how to alter your lifestyle now so you can retire as early as possible. And clearly it’d be daft not to mention OFF3R: the team have some big plans to use innovation to help investors in the future. Watch this space…
P2P PLODS ON
Lending in the P2P industry continues to grow, with new loans totaling over £700m in the third quarter of this year. The P2P Finance Association, which released the figures this week, says they confirm steady growth of new lending, and in the number of borrowers borrowing via platforms.
Cumulative lending across all the industry body’s members hit £7.1bn at the end of September 2017 – from £4.2bn a year earlier. It’s worth noting, however, that two of the sector’s largest players, LendInvest and RateSetter, aren’t included in these numbers as they both ended their membership this year.
RateSetter left in the summer after breaching the group’s operating principles (it intervened in loans to protect lenders from losses). Meanwhile, LendInvest has moved away from the P2P label, launching a retail bond earlier this year and diversifying its sources of funding.
This is something we’ve seen across the P2P board. Many of the platforms are P2P in nothing but name because so many of them take institutional funding, with models that look increasingly like tech-savvy banks or wealth managers.
Not that there’s anything wrong with institutional cash, but it would be good to see further innovation in the P2P space, with truly innovative models connecting lenders and borrowers and cutting out the flab in between. Perhaps we need to coin “I2I” – individual to individual.
SAUDI’S NINE PERCENT
This week, Saudi Arabia held what Bloomberg described as a “coming-out party of sorts” for its Public Investment Fund (PIF).
The fund is the linchpin of the kingdom’s Vision 2030, the enormous governmental effort to move the economy away from relying on revenue from oil exports. Ownership of the currently state-owned Saudi Aramco will be transferred to a fund which, according to Crown Prince Mohammed bin Salman, could control more than $2 trillion. And speaking at the three-day conference in Riyadh this week, which was brimming with the finance world’s great and good, the managing director of the PF said that they are targeting a return of between eight and nine percent for the years 2025-2030.
Vision 2030 is some feat. If achieved, it’ll be akin to China embracing markets, or the transition economies of Central and Eastern Europe after the Berlin Wall collapsed. The privatisation programme puts Thatcher’s sell-off in the shade: HSBC predicted earlier this year that there will be 100 IPOs coming to markets, in everything from hospitals to mills to post offices. The goal is to see the private sector’s contribution rise from 40 percent to 65 percent of GDP.
Opportunities abound if you’re in the City. But not everyone thinks this process of weaning the religious absolute monarchic state off its black gold is a) achievable or b) right. Saudi has a record of being financially flighty. Just two years ago it withdrew tens of billions of dollars from global asset managers in a bid to shrink its growing deficit and reduce exposure to equity markets. And then there’s the argument that such seismic changes to an economy should involve public discussion and even referenda – an unlikely move from the House of Saud.