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US Disruptor SoFi Votes with its Wallet for 8 Securities and Hong Kong

Mathias Helleu, Executive Chairman and co- founder of Hong Kong-based robo-advisor and commission-free brokerage 8 Securities. He has spoken several times at Hubbis wealth management events in recent years; in one such talk, he opened with a slide showing deserted shopping malls and cinemas, brought about, he then predicted, by the rise of global Big Tech in the form of brands such as Amazon and Netflix. As malls across the globe stand largely deserted amidst the worldwide Covid-19 crisis, these predictions are now worryingly closer to reality. Hubbis met up with Helleu again just recently by video call, during which he reinforced his message that the younger generations of investors should both expect and be delivered both minimal or zero-fee brokerage and AI-driven robo-advisory solutions. And he explained how the current global pandemic had failed to derail the purchase of 8 Securities by US online personal finance disruptor SoFi, in what Helleu calls a major vote of confidence for both the firm’s business vision and Hong Kong.

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Helleu and 8 Securities have for the past seven years been at the cutting edge of the Helleu’s Key Priorities transformation of the investor in Hong Kong to a 100% digital His first priority will be to communicate to existing and potential relationship attained without customers who SoFi is and why they should henceforth be the the need for a human advisor. brand of choice for their target customer segments. The target market is the younger generation of investors, especially “Our competition is the traditional Hong Kong institutions, as well the Millennials, which he and as some Mainland Chinese players coming here through their local team members have considered virtual bank licences,” he explains, “so Sofi will stand out as the poorly served by the incumbent American brand of choice. We have a great story to tell and as I said and other leading earlier the background is that we are competing with entrenched financial institutions in Hong and solid incumbents, but that they are also players who have Kong, who persist in charging disappointed the Millennials for too long.” high commissions and in offering His second priority is to consider – based on market opportunities poor digital interface, uninspiring and regulation – what regional geographic expansion potential investment solutions and exists. “We will first see where the target customers are either mediocre service. under-served, or poorly supported, and then analyse whether form a regulatory perspective the time is right for us to venture into TICKING THE RIGHT BOXES those markets,” he elucidates. The progress 8 Securities has made, and the business model And his third priority would be to see what SoFi offers in the US it has presented to the market that might fit well in Hong Kong or elsewhere in the region. attracted the attention of SoFi, which entered discussions with the firm in 2019, evidently looking through the extensive social was immediately clear that we own performance ranks against unrest at the time. And in April share the common goal of making their peers. this year, the result of those initial investing simpler, faster and more discussions materialised as a 100% affordable for young investors. SOFI’S INTERNATIONAL acquisition of 8 Securities, which SoFi’s commitment to enter Hong EXPANSION will after regulatory approvals Kong is a big vote of confidence “We underwent an extensive result in the firm being re-branded in 8 Securities, in our zero- process in considering our initial as SoFi Hong Kong. commission trading app Tradeflix, expansion into an international and in our city.” market, and it quickly became SoFi is evidently a strong believer clear that Hong Kong, as a major in the reputation 8 Securities has The release about the SoFi financial capital of Asia, is ripe achieved as Asia’s first mobile-only acquisition stated that SoFi Hong for innovation,” said Anthony investing service, robo-advisor and Kong would be the only brokerage Noto, CEO of SoFi. “Based on the zero commission brokerage, with a service that delivers fee-free platform we’ve built, SoFi, together strong track record of innovation. trading of over 15,000 US with 8 Securities, can meet the SoFi is one of the largest and and Hong Kong , as well as needs of both experienced and fastest-growing online personal ETFs, with zero commissions, zero novice investors alike, as part finance companies in the US, with platform fees and zero custodian of our overall efforts to make over one million members, and this fees. Members will be able to headway on our mission outside deal marks SoFi’s first international follow the investment portfolios of of the US to help people get foothold outside the . top-performing members of the their money right. Because when Helleu opens the discussion by community and learn what they it comes to achieving financial commenting: “Over the course are buying, selling and holding. independence, investing is not of our discussions with SoFi, it Members will also see where their optional - it is imperative.”

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Getting Personal with Mathias Helleu

A Frenchman and a Parisian by birth, Helleu was educated at high school through to 18 years old in Paris but chose not to go to university, instead opting to work in the financial markets, which later led him into a prominent position as partner in a small discount in the 1990s that was then sold to E-Trade.

“When we sold,” he recalls, “I was already based in Hong Kong, and E-Trade then asked me first to launch E-Trade Hong Kong, which led to a fascinating and exciting time for a decade expanding E-Trade here.”

MATHIAS HELLEU He comments that like SoFi today, E-Trade was then a disruptor 8 Securities with an established model that spawned a powerful international expansion strategy. “It was wonderful to move from a smallish Mathias Helleu and his co-founder company in Hong Kong and then to partner with a large and Mikaal Abdulla, who had before successful US firm. And then to 8 Securities,” he recalls, “with that led E-Trade’s international me bringing my background and my Co-Founder Mikaal coming business across 14 countries, from his leading role in E-Trade, and our CFO, Annie Lok, from her created 8 Securities all the way prominent role at E-Trade. In short, our core team has gone through back in 2012, and since then this adventure once before, so it’s great to be doing some of this had raised USD70 million from all over again.” investors backing their vision. Helleu has two daughters in their mid-20s, one of whom is in France TARGET: DIGITAL NATIVES and the other in Hong Kong. One of his main pastimes is sailing: “I “Our target since our early days often compete in classic sailing boat races, when time allows.” And in 2012,” Helleu reports, “are in Hong Kong, he enjoys hiking for fitness and relaxation. the digital natives, especially the millennials who make up the majority of our customers. We have been growing the brokerage GOAL: ACHIEVING new members who open their and robo-investing business here INDEPENDENCE accounts with an e-signature, with in Hong Kong, where only 10% In the April release, SoFi one whole share of their choice of of the population traded stocks commented about its business, Disney, Nike, Coca-Cola, Beyond directly and where there was, and stating that its aim is to help people Meat or Advanced Micro Devices. still is, great potential for digital achieve financial independence to In keeping with their digital native investing solutions.” realize their ambitions. The firm positioning, they asked for anyone interested to follow their Facebook: He explains that 8 Securities has stated that its own US-based tried @SoFiHongKong for more details. in recent years achieved a variety and tested products for borrowing, of firsts for innovation in Hong saving, spending, investing and Kong, such as pioneering social protecting give its more than one A 100% DEAL trading, robo-investing, as well million members fast access to The deal means a new horizon as zero commission trading in US tools to get their money right. for Helleu and colleagues. SoFi and Hong Kong stocks. “When we will buy 100% of the 8 Securities opened conversations with SoFi To celebrate the launch of what stock, and the entire 8 Securities last year,” Helleu reports, “it was will soon be SoFi Hong Kong, team will become part of what will soon obvious that our shared the US firm announced it would be SoFi Hong Kong, although the vision would hopefully result in a at that time be giving away free operations in Hong Kong will retain win-win for all parties.” stock worth up to USD100 to all a considerable degree of autonomy.

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But in the terminology of a sport in Hong Kong seem unprepared clearly don’t have a lot of incentive that Helleu greatly enjoys in his to serve the next generations. “We to adopt those lower-cost products spare time - classic yacht racing note a survey a few years back quickly, but I would say the wave - the firm’s progress to date has that showed the great majority is even more inevitable today and certainly not been plain sailing. of millennials would be more increasingly so all the time. We “A central hurdle from the start excited about the new offering have for some time already offered - and one we obviously knew we from Google, Amazon, Apple, or those types of trades for free would have to overcome - has PayPal than from their banks,” through Tradedflix, our zero-dollar been convincing our target retail he comments. “And according commission trading app for Hong customers to be confident enough to one such survey, more than Kong investors.” to place their trust in the business 70% of them would prefer to visit and deposit funds with us,” he the dentist than a bank! In short, CHALLENGING THE explains. “We have managed to we know that the vast majority STATUS QUO cross part of this major bridge but of millennials in Hong Kong feel He observes that the local compared to the brand-name local the incumbent players have not competitors have also struggled and global financial institutions who serviced them well and have not to either embrace the concept are our direct competitors here, been in tune with their demands of or adopt robo-advisory. “We more work must be done. But SoFi, and expectations.” launched robo-investing a few as one of the very few US FinTech years ago already,” he reports, unicorns that have a global vision, is Helleu says that he appreciates “but we are still waiting for the a great partner and a solid match.” that there is a lot at stake for the banks to launch cheap, affordable, industry’s old guard, remarking low barrier of entry, efficient ASIA’S WEALTH TRANSITION for example how not too long ago instruments in particular for the Asia is experiencing the largest when a Hong Kong investor wanted younger generations of investors, so generational transition of wealth in to trade a US stock, firms were actually everything is still expensive history, but Helleu has long felt that charging USD100 each way. “The here, including mutual funds. It is the banks and leading brokerages banks earn good commission and disappointing, especially as we have

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seen very little education done by LOW-COST AND FLEXIBLE the big institutions, not even on why Nevertheless, he also points they should invest, and certainly not out that the firm’s digital wealth on why they should diversify, why solutions are relatively easy to owning passive instruments such understand, as the commissions as ETFs make sense, and also on are a fraction of what is charged what other tools could be available to the typical Hong Kong to them.” customer currently, and the flexibility is immense. Helleu and colleagues believe that the human touch is no longer vital “Customers are not locked in for to this industry. “Robo-advisors work a month, a year, or 30 years,” he 24/7, not 9 to 5, and AI can provide explains. “You can get in and out of real-time insight and actionable the product at any time at no cost, plans from data that is not humanly you can own a diversified portfolio possible to obtain or digest so with as little as USD100, and you rapidly. Moreover, AI is rational, have access to the best ETFs. We not emotional, and has no conflicts have known for long that it will of interest. AI treats an individual happen in Hong Kong, so it has the same way whether investing a simply been a case of wondering dollar or a million dollars. And the and watching to see how fast the robo requires no salary, no bonus, change would take place. Actually, no vacation, no corporate credit there remains much progress to be card. The advantages appear too achieved, much work to be done, numerous to list.” but we are on the right path.”

“You can get in and out of the product at any time at no cost, you can own a diversified portfolio with as little as USD100, and you have access to the best ETFs. We have known for long that it will happen in Hong Kong, so it has simply been a case of wondering and watching to see how fast the change would take place. Actually, there remains much progress to be achieved, much work to be done, but we are on the right path.”

But Helleu’s penetration of And as to safety, Helleu notes that the market also faces another under Hong Kong rules, any cash fundamental hurdle, namely the allocated by clients to 8 Securities lack of knowledge and education of always sits in a segregated a robo-investing platform actually account with one of the banks, is, how it works and why it solves for example, HSBC or Bank of various crucial problems for people. China, and the stock certificates “We have to work hard to close themselves are held with CCASS. many of these gaps,” he comments. “Essentially, there is no risk to the

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end customer, we are on a par offset the erosion or removal of with any financial institution here,” basic product commissions. In fact, he reports. we have for some years been a prime mover, ahead of the game.” SEISMIC DISRUPTION Helleu’s vision of the future has THE B2B MODEL clearly been sending shockwaves In fact, included in the names through the brokerage and that have invested in 8 Securities financial advisory community in since its creation was Japan’s Hong Kong, and perhaps even Nomura Asset Management, more so now SoFi has taken up which put USD25 million into the the reins. But Helleu believes firm during 2018, at the same there is great opportunity ahead, time agreeing on collaboration on as the irrepressible evolution of some Asia-based digital wealth technology, accelerating as it is management services including day by day, should create a very a robo-investing solution for considerable opportunity for new-generation investors. The the wealth industry, as well as evolution of that collaboration fundamentally change it. then saw Nomura in 2019 buy out the regulated entity they had He explains that there is a formed together in Japan. great opportunity ahead in Hong Kong in the broad sphere Helleu also explains more about of wealth management. In a the firm’s B2B history. “We have zero-commission environment, achieved a good track record in the business can, he reports, this regard,” he reports, “including build several key revenues. “We the sale of our Japanese entity to have three near-term sources Nomura in Japan and also entering of revenue,” he reports. “the a contract with Nomura in Hong first of which is margin trading. Kong to build their robo-investing Implementing and then boosting platform for the younger generation margin trading amongst our of investors in Japan. SoFi will no clients here in Hong Kong will be doubt give us even more credibility one of our first priorities because from a B2B standpoint in the region. that, of course, offers decent While B2C, in other words, the retail returns relative to the risks.” customer, is our key mission, B2B The second source will be more will become increasingly important, B2B revenue, largely helping we feel.” financial institutions, mostly from outside Hong Kong, wanting LEVERAGING THE US MODEL to build their platforms for The third key area is to introduce millennials. And the third source relevant ideas and solutions of revenue would be to introduce from SoFi in the US into the Hong some of the SoFi products Kong market. “This is a complete currently successful in the US. deal,” Helleu reports, “and we “We have long worked around believe we will be able to leverage the zero commission model that, what SoFi has done for younger realistically, will become ever more generations of customers and we the norm in the future, so we are will be able to migrate some of well advanced ahead of the trend their ideas and solutions from the in terms of achieving revenues that US into this marketplace.”

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Helleu reports that in recent platform we should offer more of Hong Kong. “Look at things here months the firm has been tailor-made products for each now and compare us to the rest of extremely busy with new customers customer based on what they the world and you can see that in opening accounts, accelerated in hold, so taking the portfolio they fact, things here are pretty good part by the lockdown in Hong Kong. have created themselves and on many levels” he comments. offering more balance, for example “Frankly, I am very positive about “It is interesting to see what recommending some ETFs to Hong Kong. The regulator is both happens to such customers when complement their existing holdings comprehensive and innovative, they start working with us,” he and achieve better diversification.” even offering us solutions we had comments. “Usually when they not thought of for certain issues. tell us who they are, they do a Education of the target market In fact, the regulator worked risk profile, they first say they is a key area to focus on, looking with us to help launch the first are quite conservative, and then ahead. “We see far too much robo-investing platform, and as a they open a brokerage account activity in this market based smaller FinTech, we did not have and buy a couple of stocks, on customer ‘tips’ from friends a compliance team to sort out often based on ideas or tips they and families,” he observes, “and these issues. Additionally, there have received, then they end up certainly, things need to change is keen interest amongst the buying more and owning Google, here; greater innovation and also younger generation in financial Amazon, or Alibaba, in short, a education will help significantly.” investments, and decent and very concentrated portfolio that is growing penetration, although far from conservative. This has led BELIEF IN THE FUTURE the next step is to make sure their us to consider whether instead of Helleu closes the discussion by needs and hopes are met with the having the classic robo-investing reiterating his belief in the future right products and solutions.”

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