The Dawn of DIY Finance

This article first appeared in The Assetizer, GenTwo's thought leadership platform.

Remember when creating a mobile application required a team of developers, significant infrastructure, and relationships with phone manufacturers? Then Apple launched the App Store, and suddenly anyone with an idea could build and distribute an app?

Or remember back when starting an online store meant building everything from scratch - until Shopify made it as easy as filling out a few forms?

We're about to see the same transformation in financial services. If you are an investor, and more importantly if you build investment products, this change is going to matter immensely.

In this first post of The Assetizer, I’d like to take a high-level look at what is happening, who or what is at risk, and where the opportunities likely are.

Let’s unpack it.

Busting through the gates

Like most industries, finance is full of gatekeepers.

For centuries, banks and other large financial institutions called the shots. Then Fintech came along and started rattling the gates. It did - and does - this by removing friction. This has democratized access to financial services, and brought down prices.

But while robo-advisors, commission-free trading, ETFs and even crypto have democratized investing, financial product creation—particularly the ability to easily launch investible products at scale on any asset—has remained largely the exclusive domain of banks and specialists.

And no wonder. It requires deep expertise, significant infrastructure, and complex legal frameworks. Even sophisticated asset managers have been constrained by what banks are willing or able to offer.

That is changing now too. And as always technology is a major part of the equation. (Technology abhors a gatekeeper.)

At my employer for instance we’re building a platform to democratize financial product creation by completely disrupting the securitization process. We call this assetization, and it’s all about removing friction. Others are working on this problem as well.

The big idea is that in the not-too-distant future you will be able to log on to a platform and quickly make a product on any underlying or strategy. That’s why we like to say that the creator economy is coming to finance.

What would this mean?

Look ma, no hands

I think the most intriguing developments here are “who” the you is who is creating these products as well as the “what” that is being created.

On the “who” side, first we'll see traditional asset managers, family offices, boutiques and even individual advisors getting more creative, able to quickly launch products that would have been impractical before. In fact, we see that in our business now all the time. Banks too will start incorporating these platforms in the background as they are likely to be able to do the job more cheaply and efficiently then what they can build themselves. This is a well-known phenomenon when disruptive technology appears.

But following the logic of tech disruption, we have to conclude that individual investors will at some point be able to use these platforms to create their own products as well. Without an intermediary. In a sense, this is what DeFi is trying to accomplish in the world of crypto and tokenized real-world assets. But I’m talking about something far more universal, because it takes place on the traditional and well-established financial services rails. That means large-scale change.

On the “what” side, we are also going to see a huge expansion into the types of assets that can be securitized and made investible. This is something I don’t think is on a lot of people’s radars. We know of course that there has been strong interest in alternative assets for quite some time now. We are also in the midst of an ongoing democratization of access to private markets (more on that soon). That indeed is something that assetization is helping to facilitate.

But there is no reason to stop there. Eventually anything and everything that is of value could in theory be made investible, and done so quickly. That is the goal, and it is within reach.

(There is a separate discussion to be had around if it is desirable that everything of value in the world be made investible; my point is simply that it will become possible.)

Below is a video we made last summer illustrating what such a platform, driven by a powerful AI agent, could look like. In this scenario, the agent assetizes an art collection for a dealer, on the spot, and in real time. Check it out:

Meet the Assetization Engine of the Future

Point, click, create a product. Is this the shape of things to come in the world of asset management?

It’s time to let your hair down

So assuming we are right, what happens? Here is where risk and opportunity come into play.

Obviously, the risk in disintermediation is to the intermediaries. The platformization and subsequent democratization of financial product creation is surely going to pose a challenge to a lot of asset managers.

But as always, you can take advantage of the new wave too if you know how to ride it.

Here are some thoughts on that:

• Be personal. As we’ve written before, there is a huge move in asset management towards mass customization and hyper-personalization. These new platforms are going to make it easier for you to deliver on that. That will give you a leg up.
• Be fast (and if possible first). Our head of sales likes to talk about the advantages of first moving, particularly in this space. No doubt there will be large rewards for those who can be first to make use of these new tools to expand their product shelves.
• Be creative. New “creator” tools naturally favor those who are creative. So let your hair down. Like when Photoshop first appeared on the scene, DIY finance tools can unleash your creativity. Us them to differentiate from the competition and win new clients and assets.

If you are an investor, the democratization of finance will mean access to a vast universe of new opportunities. There will be new opportunities for returns, for diversification, and for investing in your beliefs (a theme we will be coming back to often in The Assetizer). There will be new asset classes and likely new types of strategies too. With these things there will also come new types of risk, and new pitfalls. There will be a lot to learn.

We’ll be revisiting all these themes in much more detail in the coming weeks and months, both from the asset manager and investor perspective.

With warm regards,

Tom Lyons
Head of Content, GenTwo