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proposals. Mr. Trump and congress could also ultimately defer to the SEC to act on a Fiduciary Rule.

• The biggest issue from the brokerage industry is the contract requirement under the BIC. The issue with the contract is increased liability, given the contract makes it easier to litigate. This would likely be the primary area for modifications. Even though many firms have made announcements regarding changes they expect to make, most have not figured out all of the underlying steps yet given that it is so complicated and impacts large parts of the business.

• The industry will have to move forward on implementing the rule, given the April 2017 implementation date, but firms may not put as much effort into certain areas that need to be final by January 2018. In addition, prior to Mr. Trump starting, the transition team could make an announcement about the rule. However, even at that stage firms would have to determine whether or not to act on the announcement.

• While the most likely scenario is a delay in the rule, with the potential for some modifications to ease some of the burdens, most see the trend towards a fiduciary rule already well in motion for the industry.

The Future of Tech-Based Lending

• James Paris, Executive Vice President at Avant, Ashish Jain, Senior Vice President at SoFi and John Schleck, Senior Vice President at Bank of America discussed key trends and recent developments in Tech-Based lending.

• Audience members and panelists generally agreed that improved customer service, full spectrum lending, and better pricing all are contributing to the growth in tech-based lending. SoFi did caution that better pricing is not usually the primary driver as banks can usually offer cheaper pricing.

Chart 75: What is the biggest driver of growth in tech-based lending
40%
33%
30%
27%
27%
20%
13%
10%
0%
Improved service model
Full spectrum lending
Better pricing – cheaper
All the above

Source: BofA Merrill Lynch Global Research

• Acquisition models differ by company but being efficient at customer acquisition is key for a successful tech-based lender. SoFi estimated that its customer acquisition cost is 1/5th that of a bank which enables it to effectively compete and partner with banks. Panelists highlighted the use of data analytics to more efficiently target potential customers via direct mail, digital ads or through affiliate programs.

• Audience members were split on the main risks to investing in tech-based companies with limited sustainable competitive advantage, untested credit models and fragile all highlighted as key risks. Somewhat surprising given events earlier this year, regulatory concerns were not high on the list of investor concerns.

Bank of America
Merrill Lynch

2016 Future of Financials Conference | 17 November 2016 51

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