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Five Questions for: DFPG CEO and Diversify Advisor Network Co-Founder Mike Bendix

Five Questions for: DFPG CEO and Diversify Advisor Network Co-Founder Mike Bendix. Five questions, DFPG Investments, DFPG, Diversify Advisor Network, alternative investments, registered investment adviser, RIA

In The DI Wire’s latest installment of “5 Questions for,” the editorial team interviewed Mike Bendix, CEO of DFPG Investments and co-founder of Diversify Advisor Network, on significant changes and opportunities he sees in the alternative investments industry.

DFPG is a full-service, independent broker-dealer with broad experience in a wide range of alternative investment solutions. As reported by The DI Wire, DFPG recently launched Diversify Advisor Network as part of its “long-term growth strategy to offer advisers expanded affiliation options, including both independent and W2 (partner platform) RIA platforms.”

The DI Wire: As someone who has been in the financial services industry for more than 25 years, what is the most significant change you are seeing in the alternative investments industry?

Mike Bendix: Increasingly more advisers and their clients are coming to the realization that alternative investments can be a critical component of a well-constructed portfolio. There is also a notable shift toward incorporating alternative investments into fee-based accounts, which we view as a positive trend.  However, as an industry we need to be cautious and prevent the over commoditization of alternative investments. Broker-dealers, RIAs, and advisers must implement appropriate due diligence procedures, education, and training programs and better understand the benefits and drawbacks associated with these products.

DIW: How has your company approached those changes?

MB: Our founding partners have been active in the alternative investments industry for nearly 20 years and have been dedicated to the continued enhancement of the industry. We were among the early adopters of fee-based alternative investment strategies, but that was after careful collaboration with product sponsors, industry associations, and regulatory bodies. Our general approach to alternative investments remains unchanged: do not deviate from tested and disciplined due-diligence procedures; persistently educate our advisers who engage in these products; and prioritize the needs of the investors above all else. Never compromise on the investor-first priority.  

DIW: The industry is trending toward consolidation, particularly in the RIA space. How is the Diversify Advisor Network approaching this increase in mergers and acquisitions?

MB: It is widely known that the bulk of this M&A activity is being driven by private equity firms. However, we believe that these types of transactions can present significant risk to advisers and their clients due to a fundamental misalignment of interest regarding timing and economics. Diversify’s approach is to create a clear and aligned career succession path for advisers. We avoid using capital that has 3-5-year timelines and that may not be focused on what is best for the adviser in the long term, and more importantly – their investors.

DIW: What is the Diversify Advisor Network doing to benefit advisers through these transactions?

MB: Diversify was specifically designed to allow optionality for the adviser. Whether through our employee partner program or the independent adviser model, Diversify offers a solution that can be customized for any practice. We are finding that many advisers are looking to initially affiliate as independents with a plan to migrate to the partner program in the future as a way to monetize their business, while also taking aligned equity right alongside the founders. Either way, our mantra is continued improvement and clarity of the adviser experience.

DIW: What do you see as the next wave for the industry?

MB: Service models for advisers are becoming more integrated and that trend is bound to continue.  Investors need a full suite of services: financial planning, tax, and maybe most importantly – investment management with a robust suite of product solutions to service the full gamut of client needs. We have gone “all in” to create a technology package that integrates all those functions for our advisers and customers.

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