Executive Insight: Scott Picken, Wealth Migrate
- Jun 10, 2015
By Balazs Szekely, Associate Editor
More than 21,000 people attended MIPIM, the international real estate show for professionals, which took place in early March in Cannes, France. For the first time since the event began, 26 years ago, organizers focused on the digital revolution and its tremendous impact on the real estate industry. The overriding message from industry leaders was clear: real estate crowdfunding is seen as a transformational, disruptive new technology and it is a growing phenomenon that challenges the status quo.
Scott Picken was one of the most active participants of the four-day event when it came to crowdfunding— whether as a panelist, contestant or just as an inquisitive attendee. As the founder of Wealth Migrate, Picken runs an online platform where accredited investors can come together to pool money and purchase shares in direct real estate investments across the globe.
CPE: What inspired the idea behind the project and what is Wealth Migrate exactly?
Picken: I first became aware of the funding gap in real estate investment when I started International Property Solutions in 2004. After helping over 2,200 people invest internationally, I met many people who couldn’t invest because they didn’t have the equity needed to participate, which made me realize the need to somehow equalize the playing field.
But what ultimately inspired the idea behind Wealth Migrate was the 2008 global financial crisis where Lehman Bros. went bankrupt. Because developers in London were so nervous, there were many tremendous real estate deals available. For example, I was interested in a fully-furnished, 48-unit property with double-digit yields in Wimbledon during this time, but I needed £10 million (over $17 million at that time, Ed.) to buy it. Since I couldn’t come up with that money on my own, it really made me realize the power of bringing people together and inspired me to give more people access to quality deals and partners. And Wealth Migrate is the epitome of that, in that its technology has enabled people to gain access to deals and partners worldwide.
CPE: Wealth Migrate promises nothing less than ‘Revolutionizing Real Estate Forever.’ What does this mean and how is this possible?
Picken: Technology has revolutionized many industries, including real estate, because it cuts out the middle man, reduces the barriers to entry, reduces costs and offers more efficiency. Uber, for example, has done the same to the transportation system. In the past, I used to have to phone a call center, which could be located in thousands places around the world, and they would then call a taxi to come pick me up. Now through the use of technology and an app, I can go online and directly access a driver without having to deal with call centers, who would be the middle man in this situation, which literally cuts the costs in half.
The reason Wealth Migrate is going to revolutionize real estate is that we’re going to make it much more efficient with the help of technology. Most importantly, our transparency assures people’s trust so they feel confident in using our platform. And if more people trust us to invest with, more people gain access to the best markets from all over the world instead of being stuck myopically to their little region, area or country that they are used to. By using this platform, they’ll be able to invest in numerous properties across the globe with the best partners – technology is merely the enabler that allows us to connect people to vast opportunity.
CPE: Turning to the crowd for investment is not an entirely new way of thinking. Why hasn’t it reached the world of real estate sooner? Is Wealth Migrate in the right place at the right time?
Picken: That’s right, getting a crowd to all invest in something is not an entirely new thing. We all know about the global syndications of the 80’s. But what I think is changing is the transparency of how this kind of investment takes place. Just as with Uber or Kickstarter, technology has provided many different ways for “the crowd” to come together, and has procured the idea of social proofing. With today’s convenient access to information, people are able to easily find out who the good operators are and who the bad ones are. Social proofing brings both trust and transparency – your track record always follows you.
As for if we just happened to be in the right place at the right time, Wealth Migrate has been in the works since 1999. To be honest, I would say we’ve been sitting in the background waiting for the perfect wave to arrive. Having helped over 10,800 people invest internationally on five different continents with a total value of $1.34 billion, it’s never been a question of having adequate experience in international real estate. But being in the middle of the digital revolution today, we now do find ourselves in the right place at the right time.
The world is finally reaching that point where economic, social and technological forces are all coming together: there’s the economic force of people not trusting their governments and wanting to invest internationally. There’s also the social force of people wanting to be in control of their lives and money, while finding solutions to the widening wealth gap. And finally, there’s the tech force of the Internet revolutionizing industries worldwide. Wealth Migrate is the blend of all three of these forces, and our international experience allows us to be part of the mass globalization currently taking place.
CPE: Does this new wave represent a competition for the traditional players such as investment banks and financial institutions?
Picken: Very much so. As I mentioned previously, technology cuts out the middle man. Many of those institutions are still building ox wagons while platforms are inventing high-speed cars. While some of them will eventually evolve and embrace new technology and the opportunities it brings, those that don’t will be sidelined. Investment banks and financial institutions are merely aggregators, and technology is allowing people to come together and be a force of good where the crowd’s interests are aligned.
The 20th century way of thinking is certainly not aligned with the crowd, however that doesn’t mean that crowdfunding is directly competing with the old institutions. It simply means institutions need to adapt and stay in touch with technology in the same way travel agents needed to stay in touch with AirBnB. Pure aggregation of funds will soon take place seamlessly through the Internet, with or without a middle man, so they’ll need to be unique and have a proscribed value attached to their services in order to compete.
CPE: Even if one has years of experience, the international real estate market can be a lot to get your head around. How does Wealth Migrate lower the risks and help a beginner make the right decision?
Picken: It doesn’t matter how experienced you are when you’re in international real estate. You can be the most expert investor in China, but when you’re looking to invest in the U.S., you still have to virtually start from square one. Understanding the real estate practices of a country requires a whole new methodology in each individual case: understanding how it works, how to form great partnerships there and most importantly, how to preserve wealth through partnership is different everywhere you go.
Wealth Migrate lowers the risks of investing internationally through education and access to information. We have a lot of different systems in place that help us accomplish this, such as having world-renowned educators on board. We believe that our business model is effective and efficient because we focus on two key things – providing education and offering solutions. In terms of helping beginners making the right decision, we offer a portfolio analysis to get them educated so they can make an informed decision. We also provide them with the tools that will help them find the solutions that best fit their needs.
CPE: What were the biggest challenges that Wealth Migrate has overcome so far and what provocations are you facing right now?
Picken: The legislation and compliance in different countries has been a big challenge. Every single country has different laws and quite often, countries have mutually exclusive laws to others. It has taken us many years to understand each country’s different legislations so we can comply anywhere in the world. This will also continue to be a challenge for us because crowdfunding legislation is pretty grey throughout the world. However, we believe the most important thing is making sure our investors help achieve their long-term goals. So if that means figuring out how to comply with a certain piece of legislation, than complying is our top priority.
And in terms of the provocations we’re facing, it’s the same thing, more or less. It’s the financial industry’s 20th century mindset clashing with 21st century technology and the methodology behind crowdfunding. It’s really about just trying to find the balance between the old and the new.
CPE: What is the ultimate vision that makes you push the project forward every day?
Picken: The vision was first created in 1998 when I wrote my dissertation on revolutionizing the property industry, and what that meant for the world. 49 percent of the world’s wealth is held in property, but only 12.9 percent of the world’s population actually has access to real estate. And of that population, only one percent retire wealthy. The entire system has been set up for failure, which has fueled the Wealth Movement as a result.
Through the use of innovative technology, our mission is to empower a billion people by 2020 by granting them access to more real estate investments across the world. That is what drives us. And if we help everyone get what they want, it’ll be win-win because there will be plenty of wealth to be had for all. At the end of the day, Wealth Migrate’s vision is not to take away from the one percent, but to empower the 99 percent through education and solutions.