Combating the Direct Sale

No one enjoys losing assets or the attention of a client. Wholesalers want all of an advisor’s direct investment business. Financial Advisors want to manage 100% of each client’s assets. However, we know this is far from reality. Sometimes, potential or existing assets may be lost due to an unrecognized danger; the Direct Sale!

Sponsors of direct investments that solicit high net worth individuals directly can cause resistance for the many gears of your business.

These investments are typically private, limiting the information available to your clients. The sales folks employed by these firms are many times, very persuasive. Some may say they are passionate about the investment’s potential.

Although, there are many reputable firms that sponsor direct investments and sell direct to investors, some delivering as promised, most have one goal in mind, raise capital to fund their activities. They are not evaluating an investor’s portfolio and determining an appropriate asset allocation. They are not considering an investor’s goals and understanding of illiquid investments.

As financial advisors, you take the time to get to know your clients. You understand their needs, their tolerance for risk, their investment knowledge, and their goals. You depend upon wholesalers to educate you on investment offerings, past, present, and future. Broker Dealers work to ensure that only reputable direct investment sponsors and their offerings are made available to your clients. Collectively, you work with your client’s best interest in mind.

You have a client that was solicited directly and has interest, now what?

A simple suggestion will do.

Mr. and Mrs. Client, when you and I discuss an investment opportunity, it is only after a series of other folks have conducted due diligence. First, a Third Party Due Diligence firm reviews the offering and provides their findings to my broker dealer. At that time, my B/D, will conduct its own internal review of the manager (sponsor) and the offering. If my broker dealer then elects to sign a selling agreement with the sponsor, then I begin my due diligence. If the sponsor and investment pass my tests, then and only then, I determine which of my clients would be appropriate for such an offering.