“Financial advisors won’t access alternatives just because it’s easy if they don’t understand the products, how to implement the strategy, or how talk to their clients about it… It’s really about education first and that’s why we started leading with learning.”
CAIS founder and CEO Matt Brown details his early career as a financial advisor before embarking on an entrepreneurial career that led to CAIS’s creation. Brown explains the massive opportunity that existed in the independent wealth management space and how CAIS was designed to connect independent financial advisors and alternative investments. He describes the game-changing nature of CAIS IQ, an AI-powered learning platform that delivers a customized education experience for advisors. The pandemic only accelerated CAIS’s growth as advisors leaned on virtual solutions and Brown expects significant progress over the next decade.
Matt has spent over 30 years at the intersection of wealth management, alternative investments, and platform design. He began his career as a financial advisor at Shearson Lehman Brothers and Smith Barney. In 2009, Matt founded CAIS, the first truly open marketplace for alternative investments, where financial advisors and asset managers can engage and transact directly on a massive scale. Financial advisors, the professionals we designate to oversee our economic futures, do not have the same access to alternative investments in comparison to large institutions. CAIS is changing that. Matt believes entrepreneurship is the major driver of economic and social change. He’s spent the better part of two decades working with Endeavor, the world’s leading organization for high impact entrepreneurs.
MODERATOR
SPEAKER
Matt Brown
Founder, Chief Executive Officer & Chairman
CAIS
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
TIMESTAMPS
0:00 – Intro and background
5:05 – Becoming an entrepreneur
8:12 – Founding CAIS
15:39 – CAIS IQ financial education platform
17:37 – The next ten years for CAIS
23:15 – Scaling financial education with CAIS IQ
27:15 – Evolving wealth management environment
31:20 – Educating financial advisors on crypto
33:36 – Competitive landscape
36:24 – Pandemic effects on CAIS
EPISODE TRANSCRIPT
John Darsie: (00:13)
Hello everyone and welcome back to SALT Talks. My name is John Darcy, I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT Talks are a digital interview series with leading investors, creators and thinkers. And our goal on these talks is the same as our goal at our SALT conferences, which we're excited to resume here in September of 2021 with our great partner that we're having on here on today's SALT talk but our goal is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And I will say that today's guests share a value set with us at SkyBridge, which is around democratizing access to alternative investments, as well as education around those alternative investments as well.
John Darsie: (01:01)
His name is Matt Brown. He is the founder, CEO and chairman of CAIS. He spent over 30 years at the intersection of wealth management, alternative investments and platform design. He began his career as a financial advisor at Shearson Lehman Brothers and Smith Barney. And in 2009, Matt founded CAIS, the first truly open marketplace for alternative investments, where financial advisors and asset managers can engage and transact on a large scale. He spent the better part of two decades working with Endeavor, the world's leading organization for high impact entrepreneurs. During his tenure at Endeavor, he had the opportunity to mentor dozens of entrepreneurs from around the world, including Africa, Latin America and the Middle East. Matt is honored to have been Endeavor's South African and Turkish boards, to sit on those boards, which ultimately led to the position on the global board of directors for Endeavor.
John Darsie: (01:52)
It's Matt's personal mission to ensure that anyone with a dream and the drive to achieve it, have an equal opportunity to make it happen. Hosting today's talk is, Anthony Scaramucci, who's the founder and managing partner of SkyBridge capital, which is a global alternative investment firm. Anthony is also the chairman of SALT. And with that, I'll turn it over to him for the interview.
Matt Brown: (02:12)
Thanks John.
Anthony Scaramucci: (02:13)
I'm looking at Matt's office and I'm seeing my own office there, John. Matt and I share the same location just on different floors in the same building.
Matt Brown: (02:23)
Yeah.
Anthony Scaramucci: (02:23)
You have good taste in real estate, Matt Brown.
Matt Brown: (02:25)
Yeah. I'm earning my way up, one of these days I'm going to be on a higher floor [inaudible 00:02:29].
Anthony Scaramucci: (02:31)
No, you're just using ... You're probably on a lower floor because you're more cost conscious and more commercial and entrepreneurially more successful but I want to go way back, let's go to Shearson Lehman Brothers.
Matt Brown: (02:40)
Yeah.
Anthony Scaramucci: (02:41)
Why'd you start there? What did you do there? Where were you? Were you down at 55 Water? Where were you?
Matt Brown: (02:48)
Yeah. No, actually San Francisco. I would describe myself very much as the accidental financial advisor. I graduated liberal arts degree, I was put in touch with a potential interview opportunity with a firm I had never heard of, for a job I didn't understand. I sat with the interview at Shearson Lehman Brothers to be a financial advisor. I met with a guy who literally looked like he was at a central casting for Wall Street, walked out of there, thinking, "Boy, that was a big waste of time."
Matt Brown: (03:26)
And the next day, the phone rang and they offered me a position. And back in the day Anthony, we weren't as picky about getting jobs as maybe this generation is. And so thought well, I was just excited to be offered a job out of college. I said yes immediately. Probably didn't even know what I was signing up for but I'll tell you the story there, which I think you'll find interesting. A year into it, I asked him, the gentleman that interviewed me who since became a good friend and mentor of mine, "But why would you take a risk on a kid with a liberal arts degree?"
Matt Brown: (03:58)
Didn't have a finance degree, didn't have an economic degree. And he said, "Because when I interviewed you, we spoke for two hours and I can teach people math but I can't teach people how to communicate and communication's key."
Matt Brown: (04:13)
And that really was a lesson for me. And the first moment of, "Oh. I get it, that business and finance is about personal relationships, trust."
Matt Brown: (04:23)
And also of course, the numbers and the spreadsheets but you really have to have both sides of it. I was a financial advisor for five, six years before starting my first company in the mid 90s, which is in the alternative investment space.
Anthony Scaramucci: (04:35)
You do well at Lehman. You can catch the wave of the bull market at that time, I experienced that as well. If you and I could only go back Matt, because we didn't realize in our youth how easy things were and we probably took for granted those 25, 30% sparkling returns but why'd you leave? Why would you take a risk? You had a great job working for a great firm, why do you leave?
Matt Brown: (05:04)
I think it's a couple of reasons. When you're young ... I was in my 20s, I had always had that entrepreneurial bug. Started a business in college. I had an idea. I had an idea to strike out on my own and talked to a number of people I respected. And I think the same answer came back, which is, "If you think you can do it and give it a shot, do it now because Shearson Lehman will be there if you need to on the way back in but if you're going to strike out, do it young, fail fast and you got your options."
Matt Brown: (05:41)
That's what I did, the only difference there is that I never really ever back to the big company game and just always wanted to be in the seat of an entrepreneur.
Anthony Scaramucci: (05:51)
Okay. You leave, what do you start when you first leave? What's the first business startup?
Matt Brown: (05:56)
First business was a fund that was investing in technology and healthcare companies. And it was really an exciting time. This was the late 90s, we were investing in private companies privately. We were investing in public companies privately. It's also the window of time that I probably have my biggest business regret, which is that I was negotiating with a small, struggling technology company in the Silicon Valley in the late 90s. They wanted a $20 million private placement. And we had the upper hand, they were a little bit in a distress situation. I was probably a little too young to hold back, probably asking for too much. They didn't end up doing the deal with us and I missed the opportunity. And that company was Apple computer, you may have heard of it. And that $20 million would be worth over 15 billion today, so lesson learned there. Always make sure you do a fair deal. You never know who you're negotiating with, could be the next Apple computer.
Anthony Scaramucci: (07:10)
You and I both know there was a lot going on right, because Apple ... At one point, Michael Dell, when they had asked him what Steve Jobs should do upon his return to Apple, he said, "Give the cash back to the shareholders."
Anthony Scaramucci: (07:25)
Of course, that upset Steve. And Steve famously, when Apple crossed the market cap of Dell, he sent out that public statement.
Matt Brown: (07:33)
Yeah, yeah.
Anthony Scaramucci: (07:34)
You never know what's going to happen in life. Of course, you're looking at a person that had the opportunity invest in something called Uber at a $25 million valuation. And I looked at these guys like, "I'm not going to put my daughter in a black car and no one knows who the hell the person is."
Anthony Scaramucci: (07:50)
And if you look at my American Express receipts Matthew, you'll see that my daughter's all over the place in these Ubers and I got that thing ridiculously wrong but got a lot of things right. One of the things you got right is CAIS. It's a FinTech company that you founded, you've run it for more than a decade. For those people that are listening and that don't know anything about CAIS, tell us what CAIS is.
Matt Brown: (08:12)
Yeah. CAIS is a technology platform that connects alternative asset managers, firms like you, SkyBridge, to this highly fragmented community of independent wealth advisors and financial advisors across America. A lot of people don't know that wealth management really is ... It's a story of two cities. You have big firms like Morgan Stanley and Merrill and Goldman wealth management. And there's a dozen of those firms and they control about 50% of the wealth, little over 10 trillion but there's also 10 trillion dollars in independent wealth. And that's tens of thousands of smaller firms that are entrepreneurs, that have built other own wealth management practices, many of which have come out of big firms to start their own. And they lack the infrastructure to really, in many ways, service their clients with the right products and information.
Matt Brown: (09:11)
We thought, I like to call it a bit of a David and Goliath story, I'm always up for a good fight there, "Why don't we build a platform that is a bit like a JP Morgan, Morgan Stanley platform for third party asset managers but why don't we do it in the independent channel and give them a chance to have the same platform experience and the same access to product and education around alternative investments?"
Matt Brown: (09:36)
And early on, it was a slug. There's no shortcuts in building a business but I got to say, in the last few years, especially with COVID now really kicking in, we've been able to just change the behavior of advisors to really use platforms.
Anthony Scaramucci: (09:53)
And so let's describe that to a lay person. Use the platform. And so basically, you have alternative investment managers that you vetted. They're on your platform. Advisors can then click on the technology that you've created to access easily the paperwork and to create the transaction and all of the detailed paperwork and paper trail, if you will, with your help. Is that fair to describe it?
Matt Brown: (10:26)
Yeah, that's definitely part of it. There's a lot more that is important there. We serve two communities. We serve financial advisors that on our platform but we also serve the asset managers that list their products on our platform. When we think about the user experience or the value brought for both sides of our community, financial advisors and asset managers ... I'll start with the financial advisor. Well, what do they need? What problems are we solving for them? Well, alternative investment funds are hard to access, big minimums. We reduce those minimums down to a hundred thousand dollars, 250, $250,000. They're challenging to understand, so we've invested a ... Made a huge commitment to education, scalable education on these products and asset classes. They are challenging to due diligence. And we partnered with Mercer, the global leader in operational investment due diligence to vet all of these funds.
Matt Brown: (11:32)
And then when you finally understand them and how to implement them in a client portfolio, you want to go buy them. They're very cumbersome to buy. We've digitized the entire process to make it really as close to buying a mutual fund as you possibly can get at this stage of the game. A little spoiler alert, there's a lot of change coming and innovation coming, which we can talk about in the industry but yeah, we really have built the entire end to end workflow for that.
Anthony Scaramucci: (11:58)
Seems to be a big shift taking place. It seems like the investment world, the financial advisors becoming more independent. They're leveraging technologies like the ones at CAIS and other vendors. It seems like the wire houses, which would include some of the large investment banks that have huge brokerage teams and FA teams, are losing their grip a little bit on the business. Do I have that wrong? Are there more independent RAs today and is CAIS helping those independent RAs?
Matt Brown: (12:30)
The independent wealth community, the RA community, is absolutely growing. The wire house community, the large firms are also growing. Wealth is growing overall. We are a key player in the mosaic of service providers that will help an independent RIA compete with a more established wealth management firm that may in this case, have access to an alternative investment platform. There's many, many different service providers out there that are trying to in one way, shape or form, recreate the infrastructure access or education that a wealth advisor needs to best serve their client. Yes, we're really trying to champion that on behalf of the wealth advisor.
Anthony Scaramucci: (13:16)
Okay. Explain the CAIS value propositions on both sides, for the alternative investment manager or the private equity person or long-only and the FA. Tell us what the benefits are.
Matt Brown: (13:30)
On the FA side, as I just mentioned, it's the user experience. It's making information and product accessible. And it's streamlined execution, which was very cumbersome in the past. And that package, that turnkey if you will, is really allowing alternatives to be accessible and investible in end client portfolios. The value prop to the asset manager, whether you're a private equity manager or a hedge fund manager or real estate manager, crypto, private credit venture, all things alternative, they're looking at the CAIS platform and saying, "Wait a second. There's a multi-trillion dollar pool of capital out there in the independent wealth space that have allocation rates of less than 2% in alternative investments. Not because they don't want alternatives but they lack the access to them."
Matt Brown: (14:24)
And the CAIS platform has a very efficient way to deliver those new investors. If I'm an asset management firm and I want to grow and diversify my shareholder base in a channel of investor that I don't normally spend time in, we're a very efficient way to be able to do that. In many ways Anthony, these two communities have for so long wanted to meet, that the resistance isn't around alternative asset managers wanting wealth management as shareholders or investors or wealth advisors wanting alternatives, it's the mechanisms in the industry structure that prevented it and we're ironing that out.
Anthony Scaramucci: (15:08)
Makes total sense to me. And I think it's a very exciting time in our industry because technology like yours is making for greater independence, greater freedom, also broader choice and ease of use. It's a combination of these things that makes the CAIS platform so valuable. You've made some big investments in education technology in addition to the core investment platform.
Matt Brown: (15:34)
Yeah.
Anthony Scaramucci: (15:34)
What's your vision for what you're calling CAIS Q?
Matt Brown: (15:39)
CAIS IQ, our educational platform ... Yeah, we are investing a lot in education. I think this 10 year journey that we've been on, we started where I think many other platform forms have started. Some have stopped there as well, which is, "Hey, if we make it easier or a little more seamless, we're going to be able to make this transaction flow increase over time."
Matt Brown: (16:03)
And that's not incorrect, it's just not the full story. Financial advisors will access alternatives if it's made easier but they're certainly not going to access alternatives just because it's easy, if they don't understand the products or they don't understand how to implement the strategies or they don't understand how to talk to their clients about the strategies. When we realized that, and that was a real turning point for CAIS, that this is really about education first. And that's when we started to really lead with learning, not lead with product, not lead with a wealth tech solution to make subscription documents faster. This is really about educating financial advisors, bringing knowledge and information around strategies, around fund and product and doing it in a scalable way. CAIS IQ is the leading AI powered, artificial intelligence powered, learning platform that uses machine learning and light AI to understand on a one on one basis how the financial advisor is learning and then delivering information to them around these strategies over a period of time.
Anthony Scaramucci: (17:13)
Makes total sense, I love it. You start in '09, the world is totally different. The phone that we have is way more powerful. We had a pandemic, so now we're talking the way George Jetson talked to his wife, "Here we are together."
Anthony Scaramucci: (17:29)
Big differences in the last 10 or 12 years. Tell us what the next 10 years are going to look like.
Matt Brown: (17:38)
As it relates to CAIS specifically, the next decade is very exciting. I think a lot of entrepreneurs probably believe they were early on ideas. I don't think that's an uncommon thing to hear from an entrepreneur or a founder. I can say without doubt, we were very early on this idea, things needed to catch up. I do remember having conversations in 2011 and 12, 13 with big asset management firms. And we were talking about delivering the independent wealth channel to them as investors. They were scratching their head, saying, "Why would we ever do that?"
Matt Brown: (18:15)
Now, it seems you can't speak to an alternative asset manager without them saying, "Wealth is our number one channel priority."
Matt Brown: (18:22)
Just look at Blackstone, look at Carlyle and KKR. We were early on that. We really feel momentum in the flywheel. COVID has just absolutely accelerated platform adoption. And the reason is, is because the average age of a financial advisor is 56 years old and technology and building their business with tech has not always been a priority but when the pandemic came and it forced a change in behavior, it forced an adoption of technology. And we were right there for that. We really feel like this is an exciting time, as you said. A lot of great tailwinds around regulatory environment, structural environment to make this go. What you're going to see, is I think two things. CAIS continuing our mission to democratize access, fill in the blank. It's not going to stop at just what you and I would call alternative investment funds. There's more out there. Anywhere that we can level the playing field for every financial advisor and maybe even beyond to the end investor.
Matt Brown: (19:21)
15 years ago, there was only a fraction of the investment information out there, and you usually went to a financial advisor to learn. Today, individual investors are getting information everywhere. This is the day of Robin hood, this is the day of betterment. We got to think about that end investor in a different way. New products and democratization for sure but the real change here is going to be what you're talking about, this impact that really, forward technology is a going to make on all industries, including ours.
Matt Brown: (19:54)
Anthony, you and I today can go to JK Airport. We can cut the line with TSA because someone told them that at some point, we're actually not bad guys. And that seems to be good enough for us to get on an airplane but if I want to invest in Blackstone's real estate fund, I have to photo my driver's license and send it to them and manually fill out a form. That's ridiculous. With blockchain, with other technologies, it's not about, as we say, putting landlines in faster, it's about skipping two steps and going straight to mobile. It's not about making sub docs more efficient or subscription processes more efficient, it's about eliminating them completely.
Matt Brown: (20:40)
And you're going to see that change happen and when it does, it's going to have a massive impact on the way advisors allocate because if you can start to buy alternatives, like you buy an ETF with a CUSIP and accreditation rules for end investors are changing to include an educational requirement, not just a high net worth requirement, you're going to see a massive change. What's happening today, is that alternatives are replacing active management and that's a sea change of allocation.
Anthony Scaramucci: (21:13)
It makes sense. I got to turn it over to the erstwhile John Darsie, who dressed up for this occasion, didn't realize that he was going to be with two old timers that were dressing like millennials. Now, he's dressed like the old timer.
Matt Brown: (21:29)
You got .hoodie and I got a vest.
Anthony Scaramucci: (21:29)
He's got questions for you and it would be remiss of me not to include him.
Matt Brown: (21:33)
That's really funny though because you're wearing a hoodie, trying to look cool. I got this vest on, trying to ... And [inaudible 00:21:40].
Anthony Scaramucci: (21:40)
You even got great product placement. I'm placing product for Ralph Lauren. I got to get a SkyBridge or a CAIS hoodie going next time.
Matt Brown: (21:48)
I'll send you a CAIS vest.
John Darsie: (21:50)
And at least Matt embraces his distinguished salt and pepper hair, whereas you have too much shoe polish in there. It's very visible on the camera, Anthony. I'm just saying. He's going to ignore that one. But Matt ...
Anthony Scaramucci: (22:05)
[inaudible 00:22:05] why I'm ignoring that. I'm going to tell you why I'm ignoring that, okay. It's not shoe polish, okay. This is very terrific permanent dye and I also put a little bit of a glaze on it. I was experimenting with a glaze prior to the SALT conference, okay. It's not quite what he's saying, okay but go ahead. Keep going, Darsie.
Matt Brown: (22:22)
Yeah.
Anthony Scaramucci: (22:22)
When he needs the shoe polish, he'll be calling me because I'm an expert on hair color, okay but go ahead. Keep going, John.
John Darsie: (22:30)
I want to start with a little plug about our partnership related to SALT. You talked about CAIS IQ and one of the things ... And I was very familiar with CAIS going into our partnership but didn't fully appreciate what you guys have built with CAIS IQ and how important that is to the educational process for both advisors and helping investment managers that are on your platform communicate their unique value proposition to your distribution partners but we have a SALT learning center that we're partnered with CAIS on for the conference, where we are enhancing some of that education that we are both passionate about. It's why we launched SALT, it's why you guys launched CAIS IQ. And it's part of your mission with CAIS. Could you talk about the thinking again, behind CAIS IQ and the SALT learning so center and what we're doing for the conference?
Matt Brown: (23:12)
Yeah, really important. Let's just take a half step back. I'm a former financial advisor and I know a lot of financial advisors and have throughout my entire life. And I can tell you one thing, financial advisors do not talk about things they don't understand. They have that special role, they are the advisor, consultant to their client. They are to a large degree, expected to know a lot about a lot of different things. If you don't understand as a financial advisor, a hedge fund or a private equity strategy or a crypto strategy, there's a very good chance it's not going to come up in a conversation and certainly not going to end up in a portfolio. We wanted to understand, "How can we get education on this out and broad?"
Matt Brown: (23:59)
... but there is no real method. White papers, seminars, all manual, no one reads them, PowerPoints, forget COVID even attending anything. We needed a modern approach to learning. And I met an individual named Andrew Smith Lewis, who spent his entire career at the intersection of AI, machine learning. And he built an amazing platform and I made him an offer he couldn't refuse. I said, "Let's go transform education and wealth management."
Matt Brown: (24:31)
We built at CAIS, the most modern learning application, where we gamify learning in a way and measure impact of that learning through data for each individual advisor. Fully scalable, it's on an app on a desktop and what we're finding now, is that many, many of our advisory firms, whether big or small, are really wanting their advisors or in some cases, mandating their advisors to interact with CAIS IQ before they make their investments on behalf of their clients. And it's really making a difference. Advisors are feeling more armed with information, having better client conversations. And we're doing what we want to do, which is lead with learning and transform this industry.
John Darsie: (25:18)
Yeah. I think you hit the nail on the head with all of that. At SkyBridge, one of the things and one of the reasons why we've been so successful in distributing our fund to funds product into the financial advisory community, is that focus on education and engaging with the advisor and engaging with their clients to help them understand what they're investing in. Like you said, the advisor likes to be able to sound intelligent and be educated on products that they're putting their clients in. And if they're not, they're not going to transact.
Matt Brown: (25:45)
Yeah.
John Darsie: (25:45)
And so I think what you guys have built is amazing, the way you've gamified it. Talk about potential regulation in the pipeline around an education standard, rather than a wealth standard.
Matt Brown: (25:54)
Yeah.
John Darsie: (25:54)
You're allocating to alternatives. I think you guys are laying the groundwork for that and we're very excited to integrate it with SALT for SALT New York, which we're again, excited to partner with CAIS on in September. We're excited about that and having a lot of advisors that are in your community attending the conference, both in person and virtually and al lot of the funds that are on your platform participating as well.
Matt Brown: (26:14)
Yeah. And I have to say, the reception from the advisor side that we've been able to invite has just been overwhelming. We're at capacity and we are at a waiting list right now. It seems like the SALT conference is really ... It's getting a lot of traction and I'm happy to open it up to the RA community. It's great.
John Darsie: (26:35)
Yeah, absolutely. And you guys are a great partner on that. You talked a little earlier about some structural changes that you're seeing in the industry, that are paving the way for greater democratization of alternative investments. We've already seen several FinTech companies that are popping up, that are in their earlier stages. You guys are much more mature and robust in your offering and your business tackling the technology side but there are structural barriers. There are structural opportunities around things like minimums and things of that nature. There's regulatory barriers, there's tech and data barriers. How are you guys addressing those and what are those trends that you're seeing, if you could just explain those again to the audience?
Matt Brown: (27:14)
Yeah, sure. There's just a tremendous amount of tailwinds when it comes to the intersection of wealth management, alternative investments, technology, FinTech. And obviously, we're not the only platform that is benefiting from that. Some platforms that are very close to what we're doing, are doing great. Others that are in adjacent businesses are feeling that but again, our view is, anyone who's contributing to the narrative, to the impact of changing the industry is welcome. We very much believe that like every other aspect of Wall Street and also wealth management, this is not a one market or one platform business. You're going to have a handful of winners, just like there's a handful of custodians, a handful of reporting providers that are doing great work. And that innovation and competition is critical.
Matt Brown: (28:07)
Some of the bigger trends ... I'll just take the regulatory trend for a second. For some reason, it's taken a long time but our government finally realized that just because you're wealthy, doesn't make you smart. And I think that's great because if I went to a great school and decided to get my degree in business or finance and then decided I wanted to spend my time in the nonprofit community and not earn a lot of money but yet I understand complex investments or alternative investments, up until recently, I wasn't able to invest in them because I wasn't wealthy enough but at the same time, there could be an individual who may not know anything about alternative investing but inherits lots of money or maybe they sold a business. And so wealth is not equal capability and that's actually a huge step forward in democratization of access for all, which is a big and important theme. That's the regulatory side.
Matt Brown: (29:05)
The other side of it of course, is just structural. We are seeing more and more innovation right now than we've ever seen before with asset managers creating more wealth friendly investment structures to deliver their strategies to the wealth community. And when I say wealth friendly, what do I mean? Investment minimums that can be scaled across their entire book of business, investment structures that do address lower investment minimums and also accreditation requirements, reporting that's been made easier and faster. There's real structural change at work here. And I think there's a complete adoption happening on the wealth side at scale, as a result of that.
John Darsie: (29:54)
Right.
Matt Brown: (29:54)
Of course, you're also seeing technology play an enormous role, as we talked about. Look at what Apollo just did and their announcement with ... I believe it was Figure, a blockchain company to tokenize funds. We can talk about that for two or three hours but when you start thinking about a world where there's no longer a need for a fund structure, right and you're still able to replicate the rules base of that or legal base of that, that's a game changer.
John Darsie: (30:28)
Yeah. Figure is a fascinating company. We had the president of Figure, Asiff Hirji, on SALT Talks and what they're doing, taking blockchain technology tokenization and bringing it into the institutional world, it's certainly fascinating. I got a question about crypto digital assets. You guys have a Bitcoin fund on your platform, Galaxy. We're great friends with Mike Novogratz, great fans of what they're doing over there. As you guys look at an asset class, I don't need your opinion on whether Bitcoin's going to a hundred thousand or a million dollars a coin but as you guys look at a new asset class and how to onboard those types of products onto your platform, how to educate people around that, how do you guys think about that? Are you more cautious? Are you more responding to customer demand on the product side? Or how did you tackle that decision about whether to include crypto on your platform and how to educate advisors around that?
Matt Brown: (31:20)
Yeah. Everything we do at CAIS, we're a marketplace. We want to take the feedback that we're hearing from the community of investors or financial advisors and make sure that our platform is responsive on what they're interested in. We started crypto, not with the product on our platform but with just educational opportunities, "Let's learn about crypto. Let's start getting a little more fluent on what this means. What is blockchain? What is Bitcoin? How does it work?"
Matt Brown: (31:52)
We found that the topic broadly of blockchain and crypto, has from an engagement score level on our platform, the highest content engagement scores by far. Now, it could be because it's the most popular and least understood but more and more advisors are wanting to learn more and more. We wanted to make sure that we heard our audience and then they started saying, "Well, if we want to take the next step and start to get exposure, how do we do that?"
Matt Brown: (32:23)
And that's when we started looking at the field of players out there, we bring in our partner Mercer, who does the due diligence. And we got very comfortable with Galaxy, with Mike Novogratz's firm and fund and we started there. And we will be always pushing the envelope to a large degree on newer strategies. It's good to have your core basic four food groups right, on the shelf but you also have to have a few other things that are a little bit more satellite and that's what we're doing with crypto and we're going to continue to do with other things.
John Darsie: (32:57)
And I know Andrew Smith Lewis is very crypto enlightened and we're excited to have a conversation with him and Mike Novogratz on the CAIS alternatives track at SALT. Very much looking forward to that one.
Matt Brown: (33:07)
Yeah, that's going to be a [inaudible 00:33:08] conversation.
John Darsie: (33:08)
As you look out ... Yeah, it's going to be fantastic but as you look out on the competitive landscape for CAIS, what do you see as the competitive landscape for CAIS? Obviously, like I was saying, there's a lot of firms that are iterating around FinTech, alternative investments are certainly an area that's hot in terms of companies trying to create solutions to democratize access and go either direct to consumer or through advisor channels but what do you view as the competitive landscape?
Matt Brown: (33:36)
The competitive landscape is evolving. There are more and more platforms coming to market in different ways, trying to maybe put a different spin on approach. There's a couple of very large players who are at least today, dominating. And we think that's fine. The real competitive forces though however, have nothing to do with any of these other platforms. We can call ourselves competitors, we can feel that we might actually in some cases be competing but when you have a 10 trillion dollar market in the independent wealth, with 2% allocation rates to alternatives and then platforms like CAIS are only getting a small fraction of that, what we're really competing against is changing the behavior of financial advisors to use platforms. And I liken that to how an Amazon has changed the behavior of how people shop.
Matt Brown: (34:43)
Anthony, me and you and John, we will literally go and buy something on Amazon that we know is in a store less than a mile away from our house. Why? Because we've now changed how we go shopping. We like Amazon, it's easier, it's faster and we are just not going to hop in the car and go to CVS anymore. And that's changed the behavior. There are more transactions happening in alternative investments by a huge multiple. The old fashioned way of an advisor finding it themselves, doing their own due diligence, maybe filling out cumbersome paperwork, than are happening on platform. When I think about the competitive landscape, I cheer anyone who's competing and adding value that's a quasi competitor because what I think they're doing, is educating the market for us. Really, what we have to be doing is capturing all the transactions out there by convincing financial advisors that the single best way to be able to allocate to alternatives is on an end to end platform like CAIS, where there's education, product menu, due diligence and transactional ease of use.
John Darsie: (35:53)
The pandemic has had a profound impact on a lot of different types of businesses in different ways. It's had a profoundly positive impact on FinTech companies and on any technology driven business. And I'm curious what you guys observed as the impact on the CAIS platform, on funds that you work with on your platform, on advisors that you work with on your platform, how they dealt with the dislocation that took place during March of 2020, at the onset of the pandemic but what's been the overall impact to your business and how you guys think about your business from the pandemic?
Matt Brown: (36:25)
Yeah. Speaking of changing a behavior, the pandemic ... Obviously, not all businesses did well and we always are grateful to be in the category that as a technology platform, we were in the category that was positively impacted by that. What the pandemic did, is it was the true catalyst to change behavior, as we just talked about. As I mentioned, the average age of a financial advisor is in their mid to late 50s. They did not grow up being digitally savvy in many cases. They built their relationships on handshakes, spending time with their clients, so all manual. And we all are creatures of habit and we resist change.
Matt Brown: (37:15)
What happened in the pandemic, because the world did change, we no longer met with our clients face to face, has been a complete shift and adoption of technology across the board, whether it's them meeting now for the first time, truly e-signature capabilities to sign documents, to video technology, to financial advisors no longer needing to meet people to make investment decisions, or asset managers or their teams. As a result of that, people really said, "Okay. This is my time to really take a step forward, be a little more digitally savvy, adopt technology in a big way. I need to do it for my business."
Matt Brown: (37:57)
And CAIS was one of many, many firms that fit that profile. As a result, our adoption rates of a business have skyrocketed, volumes have skyrocketed. And we're feeling like this trend is not going to reverse back the old way, fortunately.
John Darsie: (38:14)
Right. Well Matt, it's been a pleasure to have you on SALT Talks. We're so excited for the partnership, both at New York in September and going forward. We think given our shared values, given the overlaps in some of the ways we look at business and democratization of alternatives, we're excited for that partnership hopefully going forward for many years. Thank you so much for joining us. Anthony, you have a final word for Matt before we let him go.
Anthony Scaramucci: (38:38)
No listen, I think ... Listen, as a fellow entrepreneur who started out as an FA, I get the struggle. And I think what you built is an amazing platform. And I'm super excited to see how CAIS unfolds over the next decade because I think it's going to be your best decade. And so for these young timers that are listening to the call or some of which they're participating on the call, I know that your and my best decade is ahead of ourselves.
Matt Brown: (39:05)
Thanks so much. And I know you're right. And thanks so much for the time. Look forward to SALT. Send me the name of the shoe polish, I could use it.
John Darsie: (39:15)
Oh, I like your look. I like your look.
Anthony Scaramucci: (39:15)
You could use a little bit of so replacement, too. I'm going to work on you though. Don't worry, okay. When I'm done with you Matt, your wife's going to be very happy, okay.
Matt Brown: (39:23)
If I look like you, I'll be in good shape. Take care, cheers.
John Darsie: (39:27)
All right. Well, thank you again, Matt. And thank you everybody for tuning into today's SALT Talk with Matt Brown, the CEO of CAIS. Just a reminder, if you missed any part of this SALT talk or any of our previous talks, you can access them on demand on our website at SALT.org\talks or on our YouTube channel, which is called SALT Tube. We're also on social media. Twitter is where we're most active, @saltconference is our handle but we're also on LinkedIn, Instagram and Facebook as well. But on behalf of Anthony and the entire SALT team, this is John Darsie, signing off from SALT Talks for today. We hope to see you back here again soon.