Financial leaders and advisers should brainstorm in the firestorm of the sweeping changes that include the democratization of capital that are being ushered in by the 2012 JOBS Act and its new Reg A crowdfunding possibilities.
As CEO of a commercial real estate asset management firm with a billion-dollar portfolio, I know firsthand the importance of delivering value and solid returns to investors. I also work with and talk extensively to financial advisers and here’s my message to them: don’t miss out on taking advantage of the new wave of raising funds that can transform and ease businesses’ access to much-needed capital and boost the American economy.
Earlier this year, the Securities Exchange Commission approved the new rules for Regulation A as part of the 2012 JOBS Act. Essentially, companies can now raise through a public securities offering $50 million a year—way up from the previous limit of $5 million—and allow non-accredited investors to invest.
For financial advisers, now is the time to get focused and establish your expertise as billions of dollars in fees can be earned by the financial industry. Not to mention the trillions of dollars in new wealth and GDP growth that can be created by the new financial opportunity.
Not only will your clients be investors in these JOBs Act deals, your clients will be raising capital and bringing these deals to market. Don’t think it will be only the other guy that gets cut out. If you are not adding tangible, measurable and meaningful value, it will be you who gets left out in the cold.
Let me give you an example of how helping a client commence a new Reg A deal can pay off. Let’s say you as an adviser has a client who has a company and wants to grow. The client can’t get money from a bank without signing off on a lien of their house—so they look instead to harness the power of the new Reg A to raise $30 million and pull $5 million off the table. If the adviser introduces him to the right people and helps the client do a new Reg A deal, a 1 percent fee of $300,000 can be earned.
That’s a pretty good payday, right? Well, we’re not done yet.
Then the client also needs to invest the proceeds. The adviser can help with that by investing the $5 million in assets under management, again at a 1 percent fee that translates to $50,000 a year.
If the client wants to diversify into other growth companies, the adviser can get paid 3 percent to 5 percent for counsel. Which translates to another $50,000.
Do you see why embracing new the Reg A deals is an easy call?
Keep in mind also that there’s an estimated $30 trillion wealth transfer moving from boomers down to gen Xers and millennials. It’s literally a land of opportunity.
We all know that there are tremendous pressures to reduce costs and improve investor returns—from both institutional and individual investors. In this environment complacency kills, as does disintermediation.
So it’s time to choose: who do you want to be in this new world?