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IPA Looks to Create Direct Investment Designation

IPA Looks to Create Direct Investment Designation

Soon advisors may be able to add a few more letters to the end of their name. The Investment Program Association is looking to create a new designation for advisors around direct investment products.

Kevin Hogan, President & CEO of IPAThe IPA—which has 153 direct investment product sponsors, broker‐dealers and service providers—is in the early stages of developing a certification process for advisors specializing in direct investment products.  The designation could be released as early as 2015, says Kevin Hogan, the association’s president and CEO.

The certification would be based, at least in part, on the IPA’s proficiency certification series, as well as recently released e-learning programs the association has developed. The IPA currently has five courses on direct investment products, portfolio construction, non-traded REITs and non-traded business development companies, or BDCs. But it plans to release another program later this year and two more courses next year before moving ahead with the development of a designation, Hogan says.

It can be challenging for advisors to keep up with the myriad of investment options available today. And yet, advisor training and consistent sales policies are key components to increasing investor protection, Hogan says. Creating more education and guidance in this specialized area can only be a good thing, he added.

The direct investment industry, particularly non-traded REITs, is having a record-setting year, with fundraising topping $2.5 billion in July—up from the $947 million raised in July 2012, according to the IPA.

But despite the historic flows, these products continue to be dogged by regulatory and legal issues. In May, FINRA issued a notice to firms noting brokers often provide investors with misleading information about non-traded REITs and their potential risks. The regulator said the terms needed to be clearly spelled out and that advisors should not “cherry pick” the best historical results when discussing these products.

State regulators have also honed in on this area, with the Massachusetts Securities Division going after firms, including LPL, late last year. LPL reached a $2.5 million settlement with the Massachusetts regulator in February that included repaying $2 million to investors who purchased shares of non-traded REITs and paying a $500,000 administrative fine.

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