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How one Broker Dealer Helps its Advisors with Due Diligence

The DI Wire recently discussed how two wealth managers conduct due diligence on alternative investment products. These advisors, Stephen J. Martin, CEO & Wealth Advisor for SRQ Wealth Management and Elias Rauch, Chief Investment Officer & Financial Planner for Gitterman and Associates Wealth Management, shared their extensive, detailed processes for the benefit of others.

This article will take a look at how one broker dealer helps its financial advisors with the due diligence process.

First, it’s important to note that a broker dealer’s (BD) initial step in assisting their financial advisors with alternative investment due diligence is their own, thorough evaluation. Many BDs employ one or more analysts responsible for conducting a systematic review on investment offerings and the managers who offer them.

For Martin, it’s important to know his broker dealer’s due diligence analysts and have an understanding of their process. This helps him feel confident in the products made available for his clients.

Securities America, Inc. (SAI), an Omaha, NE based independent broker dealer with over 1,700 registered representatives, agrees that advisors must have confidence in their process.

Peter Magnuson, Manager of Due Diligence for SAI says “Our due diligence process starts obviously, with our due diligence department.” The purpose of Peter’s team, he stated, is make sure advisors have confidence that any alternative investment on their shelf has been through a rigorous evaluation.

Matt Kinsella, Head of Product Management for the Wealth Management division of SAI added “Our goal is to make available a competitive platform of products, including alternative investments as well as make available resources for advisors.”

Education Portal

One of these resources is a complete step by step educational portal provided by AI Insight, Inc.

With this tool, advisors have access to product and offering level training materials. For example, advisors new to non-traded REITs, have the ability learn the ins and outs of this market through AI Insight’s educational training. Experienced advisors ready to conduct due diligence on a specific offering, are able to do so as well.

There is more to AI Insight than just training. Their portal offers the ability to document educational sessions and due diligence reviews, plus users can generate side by side product comparisons.

The system keeps its members informed of changes amongst next generation offerings. It also provides on-going monitoring, access to all past and present marketing materials, regulatory training, alerts on sponsor and offering updates, and a library of CE courses.

AI Insight is not available through all broker dealers. Only subscribing broker dealers like SAI are able to offer this resource to its advisors. Magnuson and Kinsella view it as an advantageous component of their advisors’ due diligence.

Kinsella says, “I think it [AI Insight] is an excellent step in an advisor conducting due diligence on a product.”

Additional BD Resources

The support from SAI doesn’t stop there, however. They publish The Wealth Management Bulletin to inform advisors of product updates and regulatory items.

They also provide advisors access to third party reports on non-traded REITs and BDCs. Kinsella says these reports provide a portfolio snapshot, distribution coverage metrics, composition of debt, and a narrative discussing the current phase of the offering.

Advisors have comfort in knowing that SAI’s due diligence, wealth management, compliance, surveillance, and supervision teams are in constant communications with one another. If a concern is raised or a regulatory body issues an alert on past or present offerings or sponsors, each department is aware and able to communicate effectively with their advisors.

“It’s a very integrated approach from all areas of the company,” says Magnuson.

Kinsella and his team welcome advisor calls and inquiries into any products, including alternative investments at any time.

It’s also suggested that when advisors meet with wholesalers and conduct site visits, they document these meetings and conversations.

“We encourage our advisors to have an inquisitive mind when they meet with wholesalers, even when they talk with us as to really answer all the questions that could be possible,” commented Magnuson.