Welcome to the first issue of WealthManagement, formerly REP. magazine.
We’ve written elsewhere about the reason for the change: It moves the print edition in closer alignment to our digital home at WealthManagement.com, where all this content lives alongside articles from our sister publication Trusts & Estates, as well as a focus on investments and planning for affluent investors and our own research and analysis on the industry. It’s beyond argument that business information readers prefer digital, and WealthManagement.com will be the focus of our efforts. For those who still want a print edition, we have it here—given a fresh look and, we hope, a tighter focus.
We’ll still report and write on the largest national brokerage and investment firms, as well as the independent advisor. But these kinds of distinctions are blurring. More advisors are either dually registered or provide fee-based services under a corporate RIA. The industry is changing fast, the issues increasingly complicated—our goal is to provide you with the independent clarity you need to make sense of it all.
Take, as an example, the promise of equity crowdfunding, which Diana Britton writes about here on page 44. Thanks to Phase III of the JOBS Act, your clients will be bombarded this spring by opportunities to directly invest in startups and private placements. Is this a good idea?
They say a financial advisor’s real value is to keep the client from doing something stupid. It’s my guess that the hundreds of unregistered securities that will come along later this year will be, for the most part, little better than playing a slot machine. It will be a tremendous source of new capital for the companies, of course. And like any shiny new object with a patina of techno-utopianism, it will get a lot of attention. But my guess is investors will have a hard time seeing any kind of return; it remains to be seen what kind of secondary market will develop, the commissions that will be charged, and how the thousands of small early owners will fare if any of these ventures actually grow beyond the bounds of the unregistered security exemptions. I’d guess they would get diluted out fairly quickly.
My suspicion is that neither the Securities and Exchange Commission, nor the Financial Industry Regulatory Authority, really wanted these new rules, and have tried to put enough restrictions on them to minimize the inevitable damage to investors. Still, there is a gold-rush feel to equity crowdfunding even though the first transaction has yet to happen. It will be a mad rush of money and your clients may well want to get in on it.
In this, and all other areas, our goal is to give you the information you need to keep those clients, and your own business, on the right track.