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The DI Wire Q&A with SC Distributors President Pat Miller

The DI Wire sat down with SC Distributors president Pat Miller to discuss the company, his background in the direct investment space, and the new regulatory landscape.

Can you briefly share a bit about your background and history within the direct investment industry?

Prior to entering the DPP space, I was fortunate to be able to “grow up” in the distribution business with a number of first-class asset management organizations such as American Funds, Fidelity Investments and AXA / Equitable. These experiences provided an opportunity to build on many of the best practices from a much larger, more established segment of the distribution business to what was quickly evolving into an exciting new area focused on giving financial advisors and their clients much-needed access to alternative asset classes and emerging investment managers.

What brought you to founding SC Distributors in 2009?

From the beginning, we wanted to build SC around a simple mission: provide financial advisors with access to a diversified platform of high quality, compelling alternative investments that fit well together. We firmly believe, as we did when we started, that we’re helping our financial advisor partners solve the most pressing challenges facing their clients today: diversify portfolios with risk-adjusted, yield-oriented investments to help them meet their most important life objectives.

What is unique about SC Distributors?

SC is unique in that we are a multi-product, multi-manager platform that focuses exclusively on non-proprietary alternative investment offerings. Given that SC is not a product manufacturer, we believe we can avoid a variety of potential conflicts by focusing on offering a diversified suite of non-proprietary products.

Distribution of alternative investments has been traditionally a break-even proposition, or even unprofitable. How have you made distribution a successful business model?

Given the very real limits on underwriting compensation associated with today’s retail alternative investments, it’s a fundamental challenge for dealer / managers to create or grow distribution margin after accounting for the various levels of expense (advisor commissions, wholesaling, etc.) required to distribute products through traditional retail channels. As a result, the SC business model was constructed to enable us to drive revenue through two separate and distinct activities: wholesale distribution via our managing broker / dealer, SC Distributors, as well as providing a wide range of advisory services to our investment sponsors via SC Advisory Services. We believe this creates a unique alignment of interests between SC and the sponsors on our platform and we’re delighted that this has resonated with our broker / dealer and advisor partners.

You have had a long career in the industry, what advice or insight would you give to someone just starting out?

I suppose that’s a nice way of saying that I’m old but, nevertheless, the fact that our industry is in the midst of a significant transition will invariably create a number of unique opportunities for someone beginning their financial services career. Whether it’s a focus on fundamental changes to the products being offered or the disruptive nature of how technology will change the way we help train and educate our ecosystem of broker / dealers, advisors and their investors, there are a variety of ways for individuals to bring fresh ideas and new perspectives that can have a profound impact on the future of this industry.

It’s been an interesting couple of years with respect to regulatory changes, specifically the Fiduciary Rule and 15-02. I have heard compelling arguments both for and against the regulations – can you tell me how you think they will impact the industry?

First of all, I suspect that most of the key constituents in our industry would agree that the uncertainty associated with the development and ultimate implementation of these changes has arguably been the most challenging aspect of this protracted process. That said, we’ve maintained for some time that despite the very real difficulties that the industry has faced over the past 18-24 months, these changes have the potential to help catalyze positive innovations such as greater transparency, enhanced liquidity, more rational fee structures, etc. This emphasis on continued product evolution will ultimately provide greater access to alternative investment offerings for even more investors which should translate into a much larger and more robust industry in the future.

Is SC Distributors changing anything about its distribution model with respect to the new regulatory landscape?

We’re fortunate in that our fundamental multi-product, multi-manager platform approach allows us the flexibility to respond to these industry changes in a variety of ways. Whether it’s working closely with our current sponsor partners or evaluating new potential sponsors and structures, we will continue to assess a wide range of options in an effort help us best meet the evolving needs of our advisor partners.

For more on the SC Distributors platform of products, visit their directory page here.