How to prepare clients for changes to their BDC and nontraded REIT investments

April 26, 2016

Advisers need to communicate that while upcoming account statements may look a bit different than before, the alternative investments in clients’ portfolios remain fundamentally unaffected

Apr 20, 2016 @ 12:01 am | By Clive Slovin | Investment News

While the Department of Labor’s newly unveiled fiduciary rule has dominated industry headlines in recent months, another fresh regulatory shift also has the potential to cause significant upheaval for countless advisers.

The Financial Industry Regulatory Authority Inc.’s Regulatory Notice 15-02 announced changes to NASD Rule 2340 and Finra Rule 2310. As a result of these changes, effective April 11, retail clients invested in direct participation programs — such as publicly registered business development companies and nontraded real estate investment trusts — will begin to see critical adjustments to their account statements this quarter.

These adjustments ostensibly will offer a greater level of pricing transparency and better reflect the fact that the fees for these investments typically are paid upfront. The planned changes have been in the works for well over a year.

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John E. Moriarty, ChFC
December 2015
February 3, 2016

I have been in the financial services industry for 20 years and our firm provides an education platform that gets clients to “think differently” about their financial picture.  For many years we have communicated to clients the need to diversify their portfolios using alternative asset classes and more specifically, private non-traded investments.  Due diligence on these types of financial vehicles is essential and when I learned about Blue Vault in 2010, our firm immediately began using their material as a tool to build confidence in the minds of our advisors on which alternatives to recommend to clients.  I am impressed with the way Blue Vault continues to add value to their subscribers and I view their publication as a tremendous resource in today’s complex world.