671: Predicting The Future of FInTech with Steve McLaughlin, CEO at FT Partners

Steve McLaughlin. He’s 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’s top ranked on Institutional Investors. Online Finance 35 listed him as one of the most influential people in fintech.

Famous Five:

• Favorite Book? – Jack: Straight from the Gut
• What CEO do you follow? – Jack Dorsey
• Favorite online tool? — Uber
• How many hours of sleep do you get?— 4-5
• If you could let your 20-year old self, know one thing, what would it be? – “I wished I knew where all the stocks are going”

Time Stamped Show Notes:

• 01:40 – Nathan introduces Steve to the show
• 02:27 – Steve’s company advises firms across the entire fintech landscape on raising capital and M&A—they’re 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 – Total transaction volume you were involved with last year
  • 02:58 – Financial Technology Partners transaction volume was around $10-15B
• 03:09 – Which of these 3 industries are you most excited about, like where your most interesting deals would be in?
  • 03:34 – It’s really across the board, anywhere from the B2B payments to consumer payments to online lending companies like Prosper or GreenSky and the payment space like Marketo
• 04:08 – Any other players you see in the space besides those two, Betterment and Wealthfront?
  • 04:11 – Steve appreciates Riskalyze who are behind the scenes providing the same kind of technology to RAAs and other advisors or someone like BlackRock who he advised last year
• 04:45 – FutureAdvisor is a startup going initially after the consumer side, they pivoted a little bit to be a B2B player
• 05:23 – Blackrock acquired FutureAdvisor for a $150M back in August 27, 2015
• 06:32 – FTP generally gives advice for doing large transactions and are paid on success
  • 06:47 – It’s either commission or a percentage based on the value of the deal
  • 07:38 – 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 – Nathan asks: How do you value a wealth technology company like Betterment?
  • 08:29 – 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 – Andy of Wealthfront was in Episode 498
• 10:20 – The growth of Wealthfront and Betterment are the ETFs in their assets and management
  • 10:37 – 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 – Steve personally thinks that they can have a lot of winners—there are a lot of companies in the mutual funds industry that didn’t win and a lot that are dead
  • 11:15 – So there’s no saying that the guys who invented the popularized robo advisors are going to be the winners
  • 11:28 – Steve also thinks that Wealthfront and Betterment are going to do quite well and he sees them from afar, he’s a big fan and he anticipates they’re going to be winner
  • 11:34 – Wealthfront and Betterment have already proven that at some extent, they’ve outlasted lots of other guys
  • 11:55 – 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 – Riskalyze has various risks tools and robo advisor tools that they sell into RIAs
  • 13:15 – RIA stands for Registered Investment Advisor
• 13:55 – All the models could succeed, there’s hundreds of mutual fund companies that did incredibly well
  • 14:17 – These are fintech companies
• 14:59 – Nathan is a big fan of Warren Buffett who goes to all the annual meetups and just sticks to his advice
  • 15:09 – “I’m not going to be active. I’m never going to beat the market. I’m 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’s what I do”
  • 15:19 – 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 – Why isn’t Warren Buffett recommending Betterment and Wealthfront?
• 15:47 – Steve thinks that Warren Buffett probably doesn’t know much about Betterment and Wealthfront
  • 15:52 – What Steve likes about Betterment and Wealthfront is they’re going to have really forensic case studies on stats of the population
  • 16:21 – There will be perfect comparable data on which is better
• 18:36 – The Famous Five

3 Key Points:

1. Wealth tech companies are becoming more difficult to valuate, thus a need for case studies and empirical data.
2. Empirical data can help inform your decisions, but the FINAL decision rests on your judgment.
3. How do you value a company? Look at the factors affecting their growth over a period of time.

Resources Mentioned:

• The Top Inbox – The site Nathan uses to schedule emails to be sent later, set reminders in inbox, track opens, and follow-up with email sequences
• Organifi – The juice was Nathan’s life saver during his trip in Southeast Asia
• Klipfolio – Track your business performance across all departments for FREE
• Acuity Scheduling – Nathan uses Acuity to schedule his podcast interviews and appointments
• Host Gator– The site Nathan uses to buy his domain names and hosting for the cheapest price possible
• Audible– Nathan uses Audible when he’s driving from Austin to San Antonio (1.5-hour drive) to listen to audio books
• Freshbooks – Nathan doesn’t 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