671: Predicting The Future of FInTech with Steve McLaughlin, CEO at FT Partners
Steve McLaughlin. He\u2019s one of the founders and CEO of Financial Technology Partners. He is a former senior banker at Goldman Sachs, covering fintech for over 20 years. He was recently named Investment Banker of the Year, ranked number 2 banker in Silicon Valley by The Information, and he\u2019s top ranked on Institutional Investors. Online Finance 35 listed him as one of the most influential people in fintech.
Famous Five:
- Favorite Book? \u2013 Jack: Straight from the Gut
- What CEO do you follow? \u2013 Jack Dorsey
- Favorite online tool? \u2014 Uber
- How many hours of sleep do you get?\u2014 4-5
- If you could let your 20-year old self, know one thing, what would it be? \u2013 \u201cI wished I knew where all the stocks are going\u201d
\xa0
Time Stamped Show Notes:
- 01:40 \u2013 Nathan introduces Steve to the show
- 02:27 \u2013 Steve\u2019s company advises firms across the entire fintech landscape on raising capital and M&A\u2014they\u2019re on the sales side helping people figure out where to get money, how to get money, what the valuation is, what the structure is
- 02:53 \u2013 Total transaction volume you were involved with last year
- 02:58 \u2013 Financial Technology Partners transaction volume was around $10-15B
- 03:09 \u2013 Which of these 3 industries are you most excited about, like where your most interesting deals would be in?
- 04:08 \u2013 Any other players you see in the space besides those two, Betterment and Wealthfront?
- 04:45 \u2013 FutureAdvisor is a startup going initially after the consumer side, they pivoted a little bit to be a B2B player
- 05:23 \u2013 Blackrock acquired FutureAdvisor for a $150M back in August 27, 2015
- 06:32 \u2013 FTP generally gives advice for doing large transactions and are paid on success
- 06:47 \u2013 It\u2019s either commission or a percentage based on the value of the deal
- 07:38 \u2013 Deal size varies. On a multi-million dollar deal, it can be a percent and a $100M deal, it can be 7% depending on the scale and deal size
- 08:02 \u2013 Nathan asks: How do you value a wealth technology company like Betterment?
- 08:29 \u2013 Steve looks at start the factors affecting Wealthfront or Betterment and what they think the companies will look like in 7 or 10 years
- 10:08 \u2013 Andy of Wealthfront was in Episode 498
- 10:20 \u2013 The growth of Wealthfront and Betterment are the ETFs in their assets and management
- 10:37 \u2013 Steve would use ETFs as a metric to try to predict what Wealthfront and Betterment are going to look like in 5 to 10 years
- 11:03 \u2013 Steve personally thinks that they can have a lot of winners\u2014there are a lot of companies in the mutual funds industry that didn\u2019t win and a lot that are dead
- 11:15 \u2013 So there\u2019s no saying that the guys who invented the popularized robo advisors are going to be the winners
- 11:28 \u2013 Steve also thinks that Wealthfront and Betterment are going to do quite well and he sees them from afar, he\u2019s a big fan and he anticipates they\u2019re going to be winner
- 11:34 \u2013 Wealthfront and Betterment have already proven that at some extent, they\u2019ve outlasted lots of other guys
- 11:55 \u2013 Steve thinks Wealthfront and Betterment care a lot about the consumers behind the platform and they realized that their people actually manage their money correctly over the course of time
- 13:05 \u2013 Riskalyze has various risks tools and robo advisor tools that they sell into RIAs
- 13:15 \u2013 RIA stands for Registered Investment Advisor
- 13:55 \u2013 All the models could succeed, there\u2019s hundreds of mutual fund companies that did incredibly well
- 14:17 \u2013 These are fintech companies
- 14:59 \u2013 Nathan is a big fan of Warren Buffett who goes to all the annual meetups and just sticks to his advice
- 15:09 \u2013 \u201cI\u2019m not going to be active. I\u2019m never going to beat the market. I\u2019m never going to do this stuff and just going to put it in a passive, low exchange ratio, Vanguard, SMP and 500 index and that\u2019s what I do\u201d
- 15:19 \u2013 Nathan was hoping that Andy or Jon could convince him to take a shot at one of them, throw $10K in both rooms, see what happens over a few years and do a comparison
- 15:45 \u2013 Why isn\u2019t Warren Buffett recommending Betterment and Wealthfront?
- 15:47 \u2013 Steve thinks that Warren Buffett probably doesn\u2019t know much about Betterment and Wealthfront
- 15:52 \u2013 What Steve likes about Betterment and Wealthfront is they\u2019re going to have really forensic case studies on stats of the population
- 16:21 \u2013 There will be perfect comparable data on which is better
- 18:36 \u2013 The Famous Five
\xa0
3 Key Points:
- Wealth tech companies are becoming more difficult to valuate, thus a need for case studies and empirical data.
- Empirical data can help inform your decisions, but the FINAL decision rests on your judgment.
- How do you value a company? Look at the factors affecting their growth over a period of time.
\xa0
Resources Mentioned:
- The Top Inbox \u2013 The site Nathan uses to schedule emails to be sent later, set reminders in inbox, track opens, and follow-up with email sequences
- Organifi \u2013 The juice was Nathan\u2019s life saver during his trip in Southeast Asia
- Klipfolio \u2013 Track your business performance across all departments for FREE
- Acuity Scheduling \u2013 Nathan uses Acuity to schedule his podcast interviews and appointments
- Host Gator\u2013 The site Nathan uses to buy his domain names and hosting for the cheapest price possible
- Audible\u2013 Nathan uses Audible when he\u2019s driving from Austin to San Antonio (1.5-hour drive) to listen to audio books
- Freshbooks \u2013 Nathan doesn\u2019t waste time so he uses Freshbooks to send out invoices and collect his money. Get your free month NOW
Show Notes provided by Mallard Creatives