We Reinvent The Stock Market Model

Former managing partner of KPMG Luxembourg, member of startup boards, Georges Bock, launched his own fintech invesTRe on Dec 1, 2020. This is dedicated to a more transparent and responsible investment process.

Photo: According to Georges Bock, tomorrow, the vision and experience of finance will be more virtual. / Credits © Kaori Anne Jolliffe / Silicon Luxembourg

Georges Bock, when you launched invesTRe, what was your vision?

invesTRe aims to revolutionize the trading and investment process, via a platform that connects asset managers and investors without intermediation.

We will offer investors direct access to investment opportunities, while experiencing a transparent investment process and full access to ESG criteria to assess the impact of their investment.

Using new Blockchain – Distributed Ledger Technology (DLT), invesTRe creates an unpretentious investment experience with functionality unthinkable in today’s traditional and highly intermediated investment process.

By creating a frictionless process and seamless user experience, our mission is to make investing affordable for everyone.

What is the business model?

I call it neo-stock-exchange. It’s not new brokerage, like Trade Republic and Robinhood and other platforms still connected to the traditional financial world like Wall Street or the City.

We are trying to reinvent the model by creating a new exchange, the first peer-to-peer exchange that would bring together individuals, asset managers and investors. It can become one of the first peer-to-peer platforms for investment activities. We are convinced that the market of the future will be more ESG oriented. We are currently 8 people.

“Finance will be consumed in community.”

You used to be a company manager or board member, why did you switch to startups?

I left KPMG Luxembourg to do something new. I had always been an “intrapreneur” by growing an existing company and brand in Luxembourg.

So when I joined KPMG Luxembourg, we were 100 people, and when I left the group and my role as managing partner we were 1,700.

I wanted to create something from scratch.

Between my departure from KPMG and InvesTRe, I studied at Massachussetts Institute of Technology (MIT), in order to familiarize myself with this new field of activity.

You were talking about Robinhood. How does the history of GameStop inspire you?

What we’re doing is in the same vein as GameStop. Interestingly, this is the first time that investors are starting to realize their power. If I look at the history of GameStop itself, without any value judgment, individual investors put hedge funds on the verge of bankruptcy. They organized themselves to have that strength.

It’s a landmark event, but too risky. The regulators will have to learn from this.

A shift is taking place in this world, with individual investors influencing the governance choices of the companies they invest in.

That these individuals can invest more easily, at reduced transaction costs, thanks to this type of platform, is a very good thing. But what about the transparency of the intermediation prices charged by these platforms? The regulators must therefore intervene.

This is one of the issues raised by the members of the US Congress who questioned Robinhood, after the GameStop affair.

To place orders, the platform did not compete with different market-makers to offer the best prices, as it should have done, but used only one broker.

This broker then sold his information to the hedge funds a few seconds before placing his own clients’ orders on the market. The hedge funds could then take counter-positions and make significant gains.

Robinhood paid a fine of 65 million USD for this insider trading, while causing its own clients to lose 37 million USD with these practices, according to the American regulator, the SEC.

The third problem with GameStop was that retail investors could leverage their trades to amounts higher than their initial stake, which can be very risky and dangerous.

“I wanted to create something from scratch.”

What can be done to educate people, especially small savers and investors, about such practices?

It is not that difficult. There is simple and accessible information on the Net, which allows people to build their own opinions and basic financial culture.

Our platform will also contain educational modules. With advice offered from experts and peers to choose from. For non-digital natives, we will also offer more traditional training modules with certification.

Financial education is based on the concept of independence. Many financial intermediaries want to give you financial information while at the same time making you dependent on them.

The client must be able to make choices and decisions independently. This financial education must be digital and interactive. This is what we propose with a possibility to exchange and discuss on these topics, like a LinkedIn for finance, in a way.

What will the financial world be like in a few years, a world of bitcoins?

One thing is clear. Tomorrow, the vision and experience of finance will be more virtual. Finance will be consumed via virtual platforms, as is currently the case for tourism, commerce, or music. The financial sector is far behind in this area, but the trend should increase in the coming years.

“The customer must be able to make choices and decisions independently.”

Concretely: as for these other sectors, before investing their money, individuals will inform themselves on rating platforms, look at the evaluations of other investors, before making their investment decision.

Regulators have also understood this. I hope that they will quickly regulate this trend, which will take place in any way without them, like what happened with bitcoin. A lack of regulatory framework is dangerous.

This mode of financial consumption will explode when the digital euro is issued. What blocks digital transactions between two people today is not the digitization of assets, which already exists, but the absence of digital money. As such, Bitcoin is not really money.

The day the European Central Bank issues virtual euros – not in banknotes, but in bits and bytes, readable by algorithms – the whole procedure of investment and transaction of securities, will be virtualized in smart contracts.

No more need for a lawyer for the legal part, no more need for a clearing house for the settlement-clearing to realize these transactions. Wallets, electronic wallets will replace bank accounts, money will be deposited in an iPhone and in the cloud. All this will be made compatible with blockchain.

The fund industry is not ready for this, but the customers are. It’s just a matter of organization between the supply side, which is not ready yet, and the demand side, which is waiting for these features.

When do you estimate the changeover to the digital euro?

We estimate that the changeover will take place within 2 to 3 years. We are not waiting for this deadline to launch our intermediation services. Once this crypto-currency is available, we will then integrate it into our platform, which will then reach its full potential.

This article was first published in Silicon Luxembourg magazine. Read our full Fintech edition.

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