The DI Wire recently caught up with Mike Ezzell, chief executive officer of Inland Securities Corporation, to discuss FINRA Regulatory Notice 15-02, the Department of Labor’s proposed fiduciary rule, and the overall state of the industry.
The DI Wire: You recently attended the IPA Annual Conference. Can you share any news/updates with our readers from the conference regarding direct investments?
Mike Ezzell: Our industry is facing a significant period of regulatory change. These regulatory items found their way into virtually all of the presentations from the stage and the hallway conversations outside. While challenging for the industry in the short term, you could sense that most industry participants are approaching this time period constructively, and that time of transition creates an excellent opportunity to become better product manufacturers, ultimately benefiting shareholders.
The DI Wire: Can you tell me what trends you are seeing in the non-traded REIT (NTR) space, what these new movements like FINRA’s 15-02 mean for the industry and where Inland stands on NTR products?
Mike Ezzell: The new industry account statement standards help investors transparently assess asset values and related fees, which should make non-traded REITs more competitive and encourage innovation. We believe the non-traded REIT structure is the best way for the retail investor to have access to a more non-correlated form of commercial real estate investment otherwise only available to institutional investors.
The DI Wire: As you look to 2016, where do you foresee industry sales in the coming year and what impact do you think the DOL rule will have, if passed?
Mike Ezzell: It would not be surprising if sales decrease in 2016 compared to the previous few years, which were high points for the industry. That said, advisors are embracing new industry product structures and seem eager to learn more. We have already seen a positive reception to Inland’s new multiple share-class product structure.
As for the DOL rule – we support thoughtful regulation that helps remove doubt that financial advisors act in their clients’ best interest. That said we don’t necessarily think the new regulations are necessary. For the financial advisors that we work with, we believe that they are already looking out for their clients’ best interests and are providing very valuable services through the investment and retirement planning advice that they provide regardless of whether they accomplish this through the broker-dealer or the registered investment adviser (RIA) model.
Additionally, the impact of this potential rule will have far reaching effects, not only for the non-traded REIT and alternative investment (AI) industry, but also for the financial intermediated space, and could very well change our approach to retirement assets, depending on what is decided. Despite what happens, we feel confident that we have the intellectual capacity and the innovative horsepower to continue to create shareholder friendly product structures that will meet a new DOL standard and still provide access to quality commercial real estate and income solutions.