LOYAL3 first burst onto the investing scene a couple of years ago with a simple premise: connecting people with the brands they love and providing an easy, cheap way to invest in them. The company provides a creative model that’s fee-free for investors. LOYAL3 has grown to include IPO and secondary stock offerings to its investors.
Stephen Klein, Chief Marketing Officer of LOYAL3, joins Tradestreaming for an interview about the company’s roots, how investing in stocks has changed and is changing, and how LOYAL3 is approaching product and distribution in 2016.
What is LOYAL3 and what was the genesis story (what was the inspiration the founders had to start the company)?
LOYAL3 is a financial technology company that is transforming the capital markets and concept of stock ownership. For small retail investors, our platform provides a new, easy and affordable way to invest in today’s top brands, and gain access to IPOs at the same time and price as large institutions and investors, with no fees to buy or sell stock. And for companies, we provide an innovative way to engage their affinity groups and allocate IPO and public stock to their employees, customers, partners and fans.
The idea for LOYAL3 stemmed from the thesis that ownership builds loyalty, and that enabling employees, customers, etc., to own shares of a company’s stock creates a net positive— for companies, individual investors, and the investing model as a whole. Ownership is a powerful branding and behavioral currency, and everyone should have the ability to invest in the companies they have an affinity for. In short, people care more about things they own than things they don’t, and this principle works for brands.
Has electronic trading and indexing changed the way investors think and behave with individual stocks?
Definitely. There’s been a fundamental shift in the way individuals invest. Investors are more engaged and want to have greater direct control over how they invest. There used to be a very limited set of investing options. But now, there’s a growing array of solutions that simplify the process, reduce or eliminate the fees charged by traditional brokerages, and cater toward each individual’s own personal investment needs.
Are you targeting experienced investors or investors newer to the markets?
We believe investing should be easy and affordable for everyone, so we designed our platform with newer and smaller investors in mind—ease of use, no fees to buy or sell stock, and the ability to purchase fractional shares of coveted stocks with high per-share prices. LOYAL3’s platform also attracts more experienced investors, but because we do not permit short selling or share lending and batch our trade orders, this limits the appeal to institutional investors or active traders.
What’s your IPO offering? How would investors invest in IPOs before using LOYAL3?
Historically, the ability to “invest in IPOs” had been limited to Wall Street and their core clients. It was nearly impossible for the general public to purchase shares before the first day of trading, unless they had a brokerage account and met “requirements” set by that firm, which were most always large sums of money in the investor’s accounts. Now, through the LOYAL3 platform, small retail investors are able to gain new access to IPOs, with the ability to purchase shares for as little as $100, at the same price and time as these institutions and large investors.
How are firms selling their stock via IPO using this service?
IPO issuers work with LOYAL3 because they see the value of offering IPO access to the people who really care about their company, employees, customers, partners, etc., and will bring us into the IPO process as a co-manager or part of the selling syndicate. They see this as a way to thank the people who made their success possible in the first place. So in essence they’re using IPO stock as a powerful and new brand engagement currency. We provide the same IPO services as a traditional investment bank, but also develop customized, branded digital content that enables B2B and B2C companies to engage these groups during their IPO in a more personalized way.
Is your success, in a way, a throwback to what investing used to/should be: affiliating with brands we love, etc.?
Investing has become cumbersome, expensive and overly institutionalized, and we wanted to change that. The idea of being able to own a piece of a brand you know or love makes sense and really resonates with people. It’s the difference between investing and speculating. It’s such a simple concept—if an individual already has an affinity for a company, why shouldn’t they be able to affordably invest in it? We would love to see a day where everyone is able to “own” a piece of the companies that matter most to them.
What’s next for your product service? What should investors be looking out for in 2016?
LOYAL3 regularly explores different types of opportunities that will facilitate new ways for people to invest and will be complementary to our existing offerings. We’re really excited by the possibility of stock loyalty rewards and custodial accounts, and we hope these are two things we’ll be able to offer in the future.