AIQ Summer 2018

Q U A R T E R LY

ALTERNATIVE INVESTMENTS QUARTERLY

ADISA 2018 ANNUAL CONFERENCE & TRADE SHOW October 8-10, ARIA Resort & Casino, Las Vegas Keynote Speaker

Earvin “Magic” Johnson

SUMMER 2018 VOLUME 12 ISSUE 2

FROM COMPLEXITY TO CLARITY: Understanding

Private Direct Participation Programs I Non-Traded REIT Industry Capital Raise Early Insights I Insight Study of Advisory Firms: People and Pay I Why Retail? I ADISA News

Q U A R T E R LY

SUMMER 2018 VOLUME 12 ISSUE 2

ALTERNATIVE INVESTMENTS QUARTERLY

1 — Executive Director’s Letter ADISA EDITORIAL BOARD

A Plan to Perform

Chair I Brandon Raatikka I FactRight, LLC Peter Magnuson I Securities America

CONTACT INFORMATION

4 — From Complexity to Clarity:

Understanding Private Direct

Participation Programs

ADISA I 10401 N Meridian St., Suite 202 I Indianapolis, IN 46290 Direct: 317.663.4180 I Toll Free: 866.353.8422 Fax: 317.815.0871 I E-mail: adisa@adisa.org John Harrison I Executive Director I 317.663.4172

12 — Non-Traded REIT Industry

Capital Raise Early Insights:

Full Year 2017

Tanisha Bibbs I Director of Event Planning I 317.663.4174 Jennifer Fitzgerald I Director of Marketing I 317.663.4175 Tony Grego I Associate Executive Director I 317.663.4173

14 — The 2017 FA Insight Study of

Advisory Firms: People and Pay

Erin Balcerzak I Member Services Coordinator I 317.663.4183 Design I DesignMark I Susie Cooper

22 — Why Retail?

adisa.org Copyright © 2018

By ADISA (Alternative & Direct Investment Securities Association), formerly REISA, formerly the Tenant-In-Common Association.

All rights reserved. Readers may copy sections of this publication for personal use. However, it is a violation of U.S. copyright laws to copy substantial portions of the publication for any reason without permission. The Copyright Act of 1976 provides for damages for illegal copying. If you wish to copy and distribute sections of this publication, contact Jennifer Fitzgerald at jfitzgerald@adisa.org.

28 — ADISA News & Events

Executive Director’s Letter

A Plan to Perform

By John Harrison, Executive Director, ADISA

I did a little experiment the other day on financial advice, and I’m not sure you’re going to like the result. I called a very large investment banking firm just to conduct this experiment. It went like this: “Hello, I’d like to know if I have a decent sum of money, say a couple of million dollars, to invest, can you hook me up with a good advisor who can advise and help me invest it?” I asked as part of my clever experimental plan.

“Why certainly. Let me transfer you to our wealth management group right away,” came the reply. Well, I lie, first I had to yell “representative” seven or eight times to get past the automaton.

“This is so-and-so, CFP, CLU, and I’ll be glad to help you with financial planning and our financial services,” said the gentleman at the other end. We talked a bit, some of the usual questions to start the establishment of a brokerage account and so on, but I interrupted.

“Might I just come to visit at your regional office, so I can talk to an adviser face to face?” I asked.

“Well, we can Skype and talk by phone and by chat or email, but as of 2018 we no longer meet clients in person,” he said somewhat apologetically, but I could sense there probably wasn’t much room for negotiation.

“What if I had $10 million to invest, would that rate an office call?” I tested my inkling.

“No sir, Sorry. In fact, all of our advisors work out of their home offices. None of us meets with clients personally anymore,” he confirmed the results of my experiment.

What does this little experiment really tell us?

I’ve been involved in academic level futurist research before, and this looks like the classic removal of personal intermediation—in general just the beginning of changes to come. What futurist research can tell us is approximately what will probably happen, but rarely can it tell us when that approximate something will

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happen. And, thus, when it doesn’t happen right away, predictions get dismissed.

Some listen to predictions, smell the coffee, and get ready. My own hometown of Atlanta had a bright mayor decades ago (Hartsfield). Atlanta was then a huge railroad hub. Hartsfield saw that Atlanta was in the transportation hub business—not necessarily the railroad hub business. Thus, when passenger transportation flip-flopped from 90% train to 90% plane (in the course of a couple of decades), Atlanta was ready—and consequently has the world’s largest airport today.

The question for financial advisers to ask is what business are we actually in? What does a financial adviser as part of the financial services chain really do? The simplistic answer is to say they advise. That’s sort of like asking what do coaches do? Well, they coach. This doesn’t tell us very much.

As I see it, financial advisers do basically three things: give direction regarding current and future wealth accumulation (e.g., allocations, purchases, tax and estate planning, etc.), provide access to investment products, and create an accountability for the investor to a plan. When looking at the future of financial advice, it’s important to estimate how the Internet will affect those three basic roles and perhaps create more roles.

The immediate question goes beyond to what extent can “robo-advice” disintermediate the human adviser to more a question of how well a human adviser can incorporate elements of digital intermediation into the advisement practice. Indeed, Uber would have never displaced taxicabs as a major provider of transportation if major cab companies had simply adopted the intermediating technology of the online platform. Some intermediating technologies (like Kayak.com) have enhanced airline bookings, not replaced them. Why? Because the actual product or service cannot be digitally manifested – you cannot jump into your computer and be physically beamed to another location. The tangible world intervenes.

Likewise, the average investor even if able to create a workable plan and the needed discipline to adopt and adapt it, cannot access all of the diverse investment products without some intermediation. The more sophisticated the product, the more human intermediation is needed both intellectually and to comply with regulation—and regulation is a factor in financial services which vastly complicates any simple predictive economic analysis. Just remember that today’s whole 401k retirement system which replaced the traditional company pension was born as an unintended consequence of a little-known tax law—and a couple of finance consultants who figured out how to create an investment product out of it.

The question of how human intermediation will continue to drive financial advice and create new investment products will center around questions of behavioral finance (and particularly the psychology of digital purchasing), reliability of digital platforms (and the media attention the hiccups may garner), regulatory environment, and, of course, performance. We, at ADISA, are hard at work helping you plan out success in that performance—for you and the investors.

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I’ve been involved in academic level futurist research before, and this looks like the classic removal of personal intermediation—in general just the beginning of changes to come. What futurist research can tell us is approximately what will probably happen, but rarely can it tell us when that approximate something will happen. And, thus, when it doesn’t happen right away, predictions get dismissed.

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From Complexity to Clarity: Understanding Private Direct Participation Programs

By Russell Putnam, FactRight, LLC

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Use of direct participation programs offered through private placements can help enhance the value you bring to your clients and their portfolios. A direct participation program (DPP) is an investment entity that provides investors the ability to participate in the underlying cash flow or other benefits produced by the assets in that entity. DPPs often own real estate, energy-related interests, or other assets that produce income. This article surveys risk and return profiles, fee structures, and common risks associated with private DPPs (as opposed to public programs), so that you can more confidently incorporate them into your practice.

What is Regulation D Anyway?

To start, let’s look at what how DPPs may be offered through private placements. Under the Securities Act of 1933, any offer to sell securities must be registered with the Securities and Exchange Commission (SEC) or meet an exemption to registration. Regulation D securities are issued under rules that provide exemptions to the registration requirement. Most fundamentally understood, Reg D is not an investment structure or a strategy—it provides an exemption from registration.

See the table below for a breakdown of the various provisions (Rules 504, 506(b), and 506(c)) under which issuers can offer securities pursuant to Regulation D exemptions.

Under the Securities Act of 1933, any offer to sell securities must be registered with the Securities and Exchange Commission (SEC) or meet an exemption to registration.

Regulation D securities are issued under rules that provide exemptions to the registration requirement.

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504

506(b)

506(c)

Offering Size

$5 million (over 12 month period)

No limit

No limit

Investors

Accredited and non-accredited

Accredited investors and up to

Accredited

investors only if general

35 non-accredited investors (who

investors only

solicitation used

must be “sophisticated”)

Issuer must take

Accreditation

Self-certification sufficient

Self-certification

reasonable steps to

Process

(where applicable)

sufficient

verify accreditation

Disclosure

No specific disclosure

Substantive disclosure document

No specific disclosure

required, unless undertaking

for any non-accredited investors,

required, all information

general solicitation

all information provided to

provided to investors

investors must not violate

must not violate

antifraud prohibitions

antifraud provisons

Allowed

General

Allowed, must file

Not allowed, issuers must

Solicitation

substantial disclosure

have a pre-existing substantive

document with state(s)

relationship with offerees

Of Risk and Return When reviewing private investment programs (or any investment), the most critical questions to ask include: • How are investors being compensated for the risk they are taking on?

• How are management’s interests aligned with investors’ interests?

• What kind of downside protection does the structure provide? (For instance, are investors entitled to a return of their capital before management receives a percentage of the profits?)

In order to answer these questions, it is critical to understand how investors and management are being compensated through the company’s distribution waterfall. The most accurate answers to these questions can usually only be obtained through a detailed review of the waterfall’s features, including distribution escalators, aggregate versus per asset calculation methodologies, and clawback and subordination features.

Laddered waterfalls Distribution waterfalls for private programs are commonly laddered. This means that management receives an increasing percentage of profits as the overall return to investors increases, for example as shown in the following table.

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In this example, investors receive a 7% annual return, plus their return of capital, before management has any distribution participation. Management then receives 20% of net cash flow distribution until investors have received a 14% annual return, and 30% of any excess thereafter. The distribution “hurdles” in the table appear to help align management’s interests with those of investors. However, ascertaining the hurdle rates is not the end of the exercise. It’s important to consider that the investment program may have different waterfalls for cash flow from operations versus cash flow from the sale of assets (not to mention that “cash flow from operations” eligible for distribution may be defined as including offering proceeds or reserve funds, the distribution of which could be dilutive to investors).

Waterfall methodology applied to asset sales One of the more crucial elements that you should consider when evaluating a distribution waterfall is whether the company applies the waterfall on an aggregate basis or on a per investment basis. The reason this is so important is that if a waterfall is applied on a per investment basis, management may receive profits from the sale of one asset, even though the company may experience a loss on the sale of other assets, or an aggregate loss on all of its assets once disposed. Of course, the preferred treatment is for the waterfall to be calculated on an aggregate basis, where investors often receive a return of capital and a preferred return before the management participates in the profits.

Subordination features Some distribution waterfalls, particularly in the oil and gas space, have subordination provisions, for example, as shown in the following table.

In this example, investors receive 85% of distributions until they have received a return of their capital contributions, with management accruing the other 15% from the first dollar.

Once payout occurs, investors receive 75% and management receives 25%. Of note in this example, management’s share of distributions is actually subordinated to investors receiving a 12% annual return for five years (which is why management’s share at this level accrues until this happens). However, to be clear, the example waterfall does not guarantee investors a 12% return—it only subordinates management’s interest until that hurdle is reached.

Clawback features In some waterfalls, management may agree to return any distribution it receives if investors do not receive a specific level of return after the fund has been liquidated, commonly referred to as a clawback feature. At a quick glance, a clawback feature may appear to align management’s interests with those of investors.

However, it’s important to remember that clawback features really only provide investors with protection if management actually has the financial resources to make a clawback payment upon liquidation of the investment program.

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Alignment of Interests As you work through the questions at the beginning of this section, keep in mind that the answers can often be found in the details of the company’s distribution waterfall. Of course, you’ll also want to consider other, related features in gauging risk/return and alignment of interest, like potential subordination of manager fees to current payment of preferred return, and management investment in the common equity/limited partner interests, which may place at least one of their feet into a common shoe with the investors.

Understand the Fees When reviewing an investment program, you must consider the fees: • Are fees and expenses reasonable (i.e., enable the investors to take on an appropriate risk/return profile) and in line with similar offerings?

• Does the investment program’s fee structure create any perverse incentives for management?

How is the front-end loaded?

Private DPPs syndicated through the brokerage channel are often subject to substantial sales loads, comprised of commissions and expenses. Such a load will not apply to investment through a fee-based registered investment advisor. Dually-registered advisors must decide whether fee-based or commission-based investment in any particular program is in the best interests of their clients. The following discussion applies to situations in which part of the investor’s capital will go toward a sales load.

Generally, for private programs, front-end offering commissions and expenses total between 10% to 12% of gross offering proceeds (at least for programs offering one, traditional “A share” class; some DPPs offer multiple classes, including a “T share” with a lower upfront load than shown here, plus trailing sales commissions). This typically includes fees and expenses falling within the ranges as shown in the table to the left.

The terms of up-front fees and expenses are usually straightforward.

However, it is important to review disclosures regarding organization and offering expenses with a keen eye, in order to ensure the following: • Expense reimbursements are capped • Expense estimates are not listed as a flat dollar amount or based on the maximum (and not actual) offering raise If either is not the case, be aware that these expense amounts can be relatively substantial if the program is unable to raise a significant amount of capital. For example, let’s say the PPM estimates organization and offering expenses to be $500,000. First and foremost, without a cap, management can cause the company to exceed this amount without any limitation, which obviously could be problematic and dilutive to investors, who are paying O&O expenses. Further, if the company is able to raise $50 million, $500,000 of that amount is 1% of the raise, which is a reasonable percentage for O&O costs. But what if the company is only able to raise $10 million, and 5% of capital contributions are going towards organization and offering expense reimbursements?

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Other front-end costs Let’s turn to other costs that will similarly need to be made up over the life of the program. Acquisition fees for private placements generally range from 1% to 2% of the asset purchase price. Additionally, acquisition related expenses are typically around 1% of the purchase price, but are often not capped. Acquisition expenses usually include expenses related to assets that management researches but does not cause the program to purchase— dead deal costs—as well as for assets the investment program actually acquires.

Some private programs also have financing fees. These fees typically range from 0.5% to 0.75% of any loan amount. When reviewing a financing fee, a key consideration is whether the fee is only applicable to the amount of money actually borrowed by the investment program, or to the total amount of funds available for borrowing under a line of credit. Of course, the former may be much more fee-friendly.

Remember, the front-end load represents the amount the investment assets must increase in value for the investors to receive all principal back at exit of the program. Remember, the front-end load represents much of the amount the investment assets must increase in value for the investors to receive all principal back at exit of the program.

Nuances of operating fees Assessing the reasonableness of ongoing operating fees is one of the more difficult tasks in reviewing private DPPs, because operating fees can vary significantly based on each program’s investment strategy.

Consider an annual asset management fee of approximately 1% to 2% of gross assets is typical for private investment programs. However, consider that gross assets as a basis for the fee, instead of a function of equity raised (which is also a common basis for a management fee), may increase the likelihood that management would lever up assets in order to increase the amount of compensation it receives.

Assessing the reasonableness of ongoing operating fees is one of the more difficult tasks in reviewing private DPPs, because operating fees can vary significantly based on each program’s investment strategy.

Certain types of Reg D real estate programs are also subject to a property management fee, which can vary by property type. Private real estate programs typically have more of a value-add oriented strategy and require more intensive management or lease up efforts compared to public programs. As such, private programs often charge a higher property management fee than what may be customary

Assessing the reasonableness of ongoing operating fees is one of the more difficult tasks in reviewing private DPPs, because operating fees can vary significantly based on each program’s investment strategy.

in the public, non-traded space.

Finally, 5% of hard costs is a relatively standard development fee for private placements that are focused on development or construction.

The balancing act In order to determine whether fees and expenses for private placements are in-line with similar programs and whether the fee structure creates any perverse incentives for management, it is critical to keep in mind that evaluation of fees is a balancing act. You need to assess fees as a whole, as well as their individual components, including the front-end load, acquisition fees, and ongoing operating and disposition fees.

Risk Considerations Our primary goal in reviewing any investment program should be to identify unique risks that may negatively impact returns to investors and the ability of the program to achieve its objectives. At FactRight, we balance the potential adverse impact posed by a risk with the likelihood of the risk event occurring in determining how we identify and prioritize risks for consideration of broker dealer, registered

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investment advisor, and family office clients. Private investment programs are generally subject to numerous customary risks, including the following: • Illiquidity • Lack of transparency • Limited investor participation in company governance • High reliance on key individuals to carry out the business plan • Lack of asset or share valuation procedures and lack of leverage limits, as previously discussed Beyond these customary risks, some of the most prominent red flags in private programs arise from affiliated transactions, investment allocation, and joint ventures. All of these relate to management conflicts of interest.

Conflicts of interest for management emphatically arise in the context of affiliated transactions.

Affiliated transactions may include affiliated acquisitions or sales, affiliated loans, and even entering into contracts with affiliates for services.

Whose best interest in an affiliated transaction?

Conflicts of interest for management emphatically arise in the context of affiliated transactions.

Affiliated transactions may include affiliated acquisitions or sales, affiliated loans, and even entering into contracts with affiliates for services. Affiliated transactions required heightened concern because management may have an incentive to cause an investment program to enter into a transaction on terms that are less beneficial to the program than what would be available from unrelated parties. They often place management in a precarious position of having to simultaneously advocate for the best interests of adversarial parties (the investment program and management itself, or perhaps another affiliated program). And such conflict might not even just arise when the program enters into the transaction. For example, in the case of an affiliated loan, management may be forced, in an event of default, to determine whether to pursue remedies on behalf of, or against, an affiliate.

If is very important to consider the conditions under which an investment program can enter into an affiliated transaction. Key questions to focus on include the following: A public non-traded program will have an independent board, whose approval is required for affiliated transactions. However, this is most often not the case for private placements, where management generally has significantly more latitude in consummating affiliated acquisitions or sales.

• Any there any prohibitions of certain types of affiliated transactions in governance documents?

• Who is determining the price for any affiliated acquisition or sale? Is management required to obtain a third party valuation or fairness opinion to support the price and other terms?

• Is there a mechanism in place requiring any sort of independent approval?

• Will management charge its standard acquisition fee on an affiliated acquisition?

Finally, one due diligence practice particularly important with respect to affiliated transactions is confirming that management has adhered to any requirements or limitations on such transactions in the past. The answer may reflect on management’s level of integrity. For example, can you confirm that management actually obtained that third party appraisal to support an affiliated sale from a few years back, as required by the partnership agreement?

Opportunity for the best opportunities Another potential area of concern for private placements (or any investment program) is how

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management is allocating investment opportunities between itself, the investment program you’re reviewing, and other affiliated investment programs. Reviewing an investment allocation policy is critical in determining whether management is required to present the best opportunities it identifies to the investment program. Key questions that you should use as your guide when reviewing an investment allocation policy include: • Does management only raise and deploy funds for one investment program at a time?

• Do any of the affiliated investment programs have a right of first refusal on investment opportunities?

• Can management allocate interests in acquisitions to more than one program through a co-investment arrangement?

The devil’s in the details of joint ventures and co-investments It is fairly typical that management will be permitted to allocate interests in investments to more than one investment program in a co-investment relationship. Additionally, some private programs have investment strategies that depend on joint ventures with third parties or affiliates. Co-investments and joint ventures often present unique risks. In evaluating joint ventures and co-investments, it’s key to consider the following questions: • Are the entities investing on a pari passu basis? In other words, are they required to invest on identical terms and conditions?

• Will the investment program/its manager have control of the joint venture?

• Will the investment program have any right of first refusal to purchase the co-investor’s interest in the future?

It is fairly typical that management will be permitted to allocate interests in investments to more than one investment program in a co-investment relationship.

Final considerations It goes without saying that assessment of underlying asset strategies is critical in considering DPPs. Also, as with any investment, who you and your clients are doing business with may be more important than what the investment is. Integrity and track record take on special importance in the private placement context, which is characterized by less transparency and fewer governance protections than investment in public entities. Certain prior “bad acts” can even disqualify issuers and principals from undertaking private placements, so thorough background checks are a must.

Although there are a lot of other important considerations relevant to these programs, I hope this article can provide guideposts for your due diligence of DPPs as you continue to build your alternative investment platform.

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Non-Traded REIT Industry Capital Raise Early Insights: Full Year 2017

By AI Insight

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AI Insight is the industry’s online go-to resource for alternative investment research, training and compliance support. Join the thousands of advisors and firms who for the past ten years have increased their knowledge and confidence with new product offerings on our platform.

• Non-traded REITs raised $6.6 billion in 2017, an increase over the $5.9 billion raised in 2016 when including DRP and

Non-traded REIT Capital Raise–2017 All REITs Open and Closed ($ in 000’s, includes DRP proceeds)

merger proceeds from open and closed programs.

$20,000,000

$11,325,963

$10,000,000 $8,000,000

• Approximately $4.3 billion was raised

$6,000,000

by REITs actively raising capital during the

$4,000,000

year, with the remainder raised through

$2,000,000

dividend reinvestment in closed programs.

$0

$5,922,397

raise for the year of $5.7 billion.

$12,000,000

$5,686,644

Removing this would reflect a total capital

FY 2017

FY 2016

FY 2015

$8,933,509

$14,000,000

Inc. with Retail Centers of America (RCA).

$16,760,805

$16,000,000

from the merger of American Finance Trust,

$18,892,558

$18,000,000

• The $6.6 billion includes $921.9 million

FY 2014

FY 2013

FY 2012

• 11 programs closed during 2017, reducing the number of those actively raising from 33 at the beginning of the

Non-traded REIT Capital Raise–2017 Open Programs $1,600,000

was highest in Q1. Capital raise slowed in

$1,400,000 $1,200,000

likely due to program closures, including

$1,000,000

those sponsored by W.P. Carey who exited

$800,000

the non-traded REIT business in June.

• Blackstone Real Estate Income Trust, which began its capital raise in January 2017, led the pack. The program raised $1.7 billion, or 40% of the raise for open programs during the year. Carter Validus came in second,

$600,000

$1,068,073

Q4. The higher raise early in the year was

$870,525

Q2 and Q3 but saw a modest increase in

($ in 000’s)

$1,403,124

• Capital raise for actively raising funds

$981,818

year to 22 as of December 31, 2017.

$400,000 $200,000 $0 Q4

Q3

Q2

Q1

raising $418 million or 10%.

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The 2017 FA Insight Study of Advisory Firms: People and Pay

By TD Ameritrade

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Executive Summary

A record 388 firms participated in The 2017 FA Insight Study of Advisory Firms: People and Pay, allowing for us to further segment the participant universe to gain better clarity around how firms are continuing to evolve and influence the advisory model. In this year’s study, we explore how productivity, organizational design, the scarcity of talent, compensation structure and succession planning all contribute or detract from a firm’s ability to meet its strategic objectives.

Introducing the “Pacesetters” This year we add a new peer group, the “Pacesetters,” to our traditional four (Operators, Cultivators, Accelerators and Innovators). The Pacesetters represent firms generating $8 million and above in gross annual revenue. As always, we look to understand how “Standout” firms— those in the top quartile of their peer group as defined by their ability to generate revenue and income—continue to outperform their peers, and provide insight on how firms can adopt the strategies employed.

Operators

Cultivators

Accelerators

Innovators

Pacesetters

$150k–$500k

$500k–$1.5M

$1.5M–$4M

$4M–$8M

>8M

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6.4% 12.5% 6.7% AUM Growth Rate

Client Growth Rate

Revenue Growth Rate

Healthy Trends Set the Stage for an Optimistic 2017 Finish Growth in clients and assets under management (AUM) was relatively healthy in 2016. Client growth, while dipping a percentage point in 2016 to a median of 6.4%, remains a half percentage point above our nine-year study average. Firms anticipate even stronger client growth in 2017.

Security markets once again provided tailwinds in 2016, driving annual firm AUM growth rate gains into the double-digit range. In contrast, annual revenue growth for the typical firm fell from 8.3% in 2015 to 6.7% in 2016. Most importantly, firms expect their rate of revenue expansion to jump sharply in 2017.

Client and asset growth alone, however, are not indicative of a firm’s full potential to achieve sustainable growth over the long term. The ability to generate income and grow revenue is the most important piece of the puzzle. Income-related metrics in 2016 were largely favorable for advisory firms.

Overhead Expense Margin Operating Profit Margin

Figure 2

Overhead Expense and Profit Margins 2012–2016

Percentage of Revenue

38.1%

37.8%

36.8%

35.7%

33.6% 26.1%

20.5%

2012

22.1%

2013

24.4% 19.6%

2014

2015

2016

Most encouraging is firm profitability, which is trending upward again after declining sharply in 2015 (Figure 2). The 2016 operating profit margin for the typical firm, at 24.4%, was the highest of any study year except for 2014. Better expense control contributed to improved profitability, with the median overhead expense margin the lowest of any year outside of 2014.

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Revenue per team member failed to increase for the first time since 2009, sliding 12% over the year.

On the Watch List: Productivity After rising consistently throughout the economic recovery, revenue per revenue-generating role for the typical firm has dropped 10% since 2014. Revenue per team member failed to increase for the first time since 2009, sliding 12% over the year. There are a few different theories to consider as to why we are seeing a dip in productivity after years of a more positive trajectory.

Key Elements Driving Productivity Decline

Revenue Contraction

Staffing Increase

By definition, productivity in terms of revenue per team member decreases in one of two ways: (1) revenue contracts; or (2) the number of team members increases. Recently, both sides of this equation have been working to negatively pressure productivity. In addition, more firms are looking to hire recent college graduates and individuals from outside the industry with transferable skills.

Ramp-up time for these new team members can be considerably longer, extending the timeline for maximizing their contribution toward firm goals.

The Next Best Hire?

Despite business growth, only 19 percent of advisory firms have a documented plan for future staff structure. In order to continue to deliver on their service promise to existing clients and increase capacity to take on new clients, firms need to approach organizational design with an eye toward

19%

of firms have a plan for future staff structure

supporting the firm’s growth and client experience objectives. With strategic objectives in mind, you will be able to identify the next best hires for your firm to support greater efficiencies and pursue accelerated growth.

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60%

of firms rely on some form of outsourcing

Advisors Look to Invest in the Next Generation The typical advisory firm reports that they plan to add one full-time equivalent (FTE)* in 2017, taking the median up from six to seven. However, more than two-thirds of advisory firms report that hiring revenue-generating roles—lead advisors, associate advisors and business developers—is becoming increasingly difficult (Figure 3).

Given the scarcity of talent available, firms are looking to new and nontraditional labor sources to fill the void. The most popular strategies for sourcing the talent needed are (1) pursuing outsourcing and strategic partner relationships, and (2) broadening the pool for tapping into new resources.

Figure 3

Percentage of Firms Responding

Firms Reporting Greater Hiring Difficulty by Role Type 68% 50% 43% 34% 22%

Revenue Roles

Management

Tech. Specialists

Support Staff

Administrative

Sixty percent of firms rely on some form of outsourcing and, as a result, realize labor savings. *One full-time

Functions most commonly outsourced include compliance (57%) and back office operations

equivalent (FTE) represents an individual working 40 or more

(50%). Many firms also leverage outsourcing to provide additional services to their clients through strategic partners, most commonly for tax preparation (74%), insurance (47%), estate planning

hours per week. An individual working

(39%) and elder care planning (38%).

fewer than 40 hours

For roles that best reside within the business, firms are tapping into new resource pools—31%

per week is counted as proportionately less than one FTE. Fulltime-equivalent staff

of firms are targeting new college graduates for revenue-generating roles. In addition, 36% of firms look to source management roles from outside the financial advice industry, though still

includes owners.

within broader financial services.

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Median lead advisor compensation declined.

Revenue per team member failed to increase for the first time since 2009, sliding 12% over the year.

Associate and support advisor compensation continued on a steady upward trend.

Compensation Counts—the Way Firms Pay How advisory firms compensate their teams varies among firms, with roughly half of firms providing some form of incentive pay, and 62% of firms offering performance-based pay for revenue roles (Figure 4).

Use of Incentive Compensation by Role Type

62% 49% 43%

43%

57%

55% 46%

56% 41% 35%

Revenue Roles

Manaagement

Tech. Specialists

Support Staff

Administrative

Percentage of Firms Responding

Discretionary Bonus Performance-Based Incentive

Figure 4

In terms of where compensation trends are headed overall, median lead advisor compensation declined at an annual rate of about 7 percent over the last two years to $168,050 in 2016. In contrast, for associate and support advisors as well as client service associates, compensation continued on a steady upward trend. Firms may be focusing on developing their support roles in order to release lead advisor capacity. It’s also possible that lower lead advisor compensation is simply reflective of lower productivity as well as less experience. The typical lead advisor now has two years less experience than what was reported in 2015.

In addition, as firm owners look increasingly to support a work-life balance and team diversity, they are also incorporating nontraditional benefits into their overall strategy. Two-thirds of firms offer flex-time benefits, and 41% of firms provide telecommuting benefits—low-cost ways to increase productivity, convenience and work-life balance for team members.

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The prospect of future ownership can be a strong motivator for team members.

Succession Progression—Still a Challenge for Most Firms Not much movement has been made by firms in their quest to develop a viable succession plan—nearly two-thirds of firms do not have an adequate plan, despite the growing and significant number of owners nearing retirement. Those who do have a plan for succession favor homegrown successors. In support of this trend, we are seeing the pace of adding new owners increasing, although not at a pace fast enough to alleviate concern.

Standouts Others

Figure 5 Percentage of Team Members

Primary Owners as a Share of Total Team Members 52% 42% 37% 31%

33%

31% 20%

25% 18% 12%

Operators

Cultivators

Accelerators

Innovators

Pacesetters

Figure 5 showcases the number of primary owners as a share of total team members at each stage of development. In 2017, nearly one in five firms (19%) brought on a new primary owner within the last two years. This compares with just 13% of firms in 2015. The prospect of future ownership can be a strong motivator for team members. For departing owners, developing successors from within can help control the destiny and legacy of their firm.

The Future Is Now People play a predominant role in your firm’s ability to drive continued success. Human capital resources are both your highest expenditure and most valuable asset. The deployment, motivation and compensation of this most valuable resource requires a strategic approach and continued focus for firms looking to pursue accelerated growth. Firms that can deliver an extraordinary client experience with optimal efficiency and achieve sustainable growth—the tangible results of having the right people in the right roles—have transferable value.

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SAVE THE DATE

ADISA 2018 ANNUAL CONFERENCE & TRADE SHOW OCTOBER 8-10 ARIA RESORT & CASINO LAS VEGAS

KEYNOTE SPEAKER EARVIN “MAGIC” JOHNSON

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Why Retail?

By Evan Hudson, Stroock & Stroock & Lavan LLP1

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When I begin working with a real estate operator who wants to raise third-party equity capital, one of the first things we talk about is which channel to use—institutional or retail.

For clarity, in this context, using the institutional channel means seeking investors from among the nation’s pension funds, endowments, insurance companies and ultra-high-networth families, either directly or, more commonly, through a bulge-bracket placement agent.

On the other hand, using the retail channel means seeking investors from among high-networth, mass affluent and sometimes mass market individuals, families, trusts and ERISAqualified accounts, through a managing broker-dealer that signs selling agreements with independent broker-dealers (“IBDs”), registered investment advisers (“RIAs”) and, in some cases, wirehouses, thereby forming a syndicate that markets the product.

The major advantages of the institutional channel include the potential scale and speed of capital-raising. A top-tier, brand-name sponsor using a bulge-bracket placement agent targeting the largest institutional investors might raise more than a billion dollars in a matter of months for a particular fund, with each investor committing something like $100 million.

And yet, a real estate sponsor often uses the retail channel instead of, or as a complement to, the institutional channel.

One reason is that the institutional route is not a realistic option for certain sponsors.

Secondly, even a top-tier, brand-name sponsor may still choose the retail route—and, increasingly, many do—for some of the further reasons set forth below.

Part of the reason that the institutional channel is not available to every sponsor is that institutional investors tend to think in herds.

1. Openness to a diversity of sponsors.

Part of the reason that the institutional channel is not available to every sponsor is that institutional investors tend to think in herds. Portfolio managers, usually salaried employees, have a strong incentive to avoid “rocking the boat.” Generally, portfolio managers do not get in trouble for allocating dollars to familiar, brand-name sponsors with long track records.

Perhaps as a result, sponsors have occasionally reported a certain clubbiness among the institutional set. These factors lead to an observable lack of diversity in the roster of real estate operators that institutional investors will do business with.

Contrast that dynamic with that of the retail channel, where the usual gatekeepers are

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IBDs and RIAs, many of whom are also entrepreneurs or work directly for entrepreneurs.

Some sponsors have found that, because IBDs tend to be entrepreneurial and have large and diverse client rosters, they often demonstrate a higher openness to different sponsors, including smaller retail-focused shops in addition to the largest money managers. As is evident from the list of ADISA sponsor members, the retail community welcomes entrepreneurs, including developers, family offices and emerging managers, from across the U.S., and even globally, dealing in every asset class.

2. A growing market.

Nevertheless, its relative openness to new faces does not explain why large asset managers also choose the retail channel, which serves smaller and more widely dispersed clients.

Increasingly, they choose it because, as the saying goes, “that’s where the money is.” More importantly, retail is where the money will be, if current trends continue. Private-sector defined-benefit participation has been declining for decades. According to the Employee Benefit Research Institute, a nonpartisan research institute that researches savings and retirement, in 1979, fully 28% of private-sector workers participated in defined-benefitonly retirement plans, while 7% participated in defined-contribution-only plans. In contrast, by 2014, a paltry 2% participated in defined-benefit-only plans, while 34% participated in defined-contribution-only plans—and that says nothing of the legions of workers not covered by any plan at all. From the perspective of an asset manager deciding which market to focus on, while perhaps overstating the case, it is not crazy to see the near-180-degree reversal as a shift from institutional capital (think pension funds) to retail capital (think non-qualified capital, IRAs and 401(k)s).

Anyone with eyes can see that, to a greater degree than in the past, working Americans

We remember the old joke about the Golden Rule—that whoever has the gold makes the rules. When a sponsor considers the ideal characteristics of clients—i.e., investors—the sponsor might consider the principle of relative bargaining power.

must rely on their own savings and investments to retire. Considering the gargantuan magnitude of this shift, it should surprise no one to see marquee real estate sponsors newly availing themselves of the retail opportunity. The benefits of tapping the retail market, the original focus of the earlier generation of real estate syndicators, has been amply validated.

3. More autonomy to sponsors.

To make this point, we remember the old joke about the Golden Rule—that whoever has the gold makes the rules. When a sponsor considers the ideal characteristics of clients— i.e., investors—the sponsor might consider the principle of relative bargaining power. In a typical institutional arrangement, the investor has more of it. The largest pension funds sit on hundreds of billions of dollars in assets, which is more than enough to play candidates off each other and to dictate terms. Furthermore, a typical pension fund adheres to multiple investment policies—frequently over a dozen. Each of these policies might range from several pages to over 100 pages, covering matters as varied as leverage, geographic concentration and social factors. Compliance is expected.

For real estate business owners who value autonomy, the retail channel offers advantages.

The clients can be, and ideally are, glad to be investing alongside a professional real estate

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Retail investors often need and appreciate the sponsor’s help, and are willing to pay for it, because it is simply of higher value to them.

manager, and do not have the desire or, typically, the right, to dictate policy. Additionally, there are often many more of them, perhaps hundreds in a private fund and thousands in a non-traded REIT, rather than the handful or few dozen typically participating in an institutional fund. This dispersion tends to promote autonomy to the sponsor in running its business for the benefit of investors.

4. Better economics.

This point is closely related to the prior one. Institutional investors maintain enough bargaining power that dealing with them can be a losing proposition for the sponsor. Retail investors, on the other hand, rely on their brokers or RIAs to source deals. They lack the direct access to deal flow enjoyed by institutional investors. Therefore, they often need and appreciate the sponsor’s help, and are willing to pay for it, because it is simply of higher value to them. This is why the largest sponsors charge different fees to retail than to institutional investors for the same product. It represents a classic win-win. (I know because, being “just a lawyer,” I count as a retail investor and do not necessarily get the same terms as CalPERS when I buy interests in a fund, but am still willing to do so.)

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Retail broker-dealers, sponsors and affiliate firms inhabit a proverbial “small world.� They meet at trade shows throughout the year. They go on road shows, attend conferences, network and have fun. There is a friendly mentality, and anyone may join.

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5. A nice community.

Retail broker-dealers, sponsors and affiliate firms inhabit a proverbial “small world.” They meet at trade shows throughout the year. They go on road shows, attend conferences, network and have fun. There is a friendly mentality, and anyone may join. The community is not “too cool” or “too prestigious” to welcome newcomers. On the contrary, the players recognize that a growing market is best served by a growing industry group.

6. A loyal syndicate; permanent capital.

Sponsor-distributor relationships tend to last for a long time, and the person-to-person relationships even longer. Prospective new entrants are well advised to either commit to the retail space, basically forever, or not try to enter at all. It takes a long time to develop a reputation in the market. Once a sponsor’s reputation has been established, and if its products have performed well, the syndicate will tend to remain on hand for future deals—a reliable source of “permanent capital” if there ever was one.

7. A long tradition of self-regulation.

The American traditions of self-regulation and self-help are alive and well in the retail space.

ADISA consists of sponsors, broker-dealers, RIAs and affiliates who meet to network, educate themselves, advocate for best practices within the industry and, at both the state and national levels, promote capital formation. Even small sponsors have a voice. If a party wishes to meet

Sponsor-distributor relationships tend to last for a long time, and the person-to-person relationships even longer. Prospective new entrants are well advised to either commit to the retail space, basically forever, or not try to enter at all.

business partners, learn about the space and influence lawmakers, the infrastructure is already in place. All the principals have to do is show up and get involved.

8. Directly helping individual investors.

Most sponsors in my experience derive great satisfaction in helping investors directly. They do this by providing exposure to asset classes such as office buildings, triple-net-lease assets, mortgage loans, hotel developments and many others. As opposed to shares of a publicly traded REIT, these investments offer lower correlation to the broader equity market and direct exposure to a typically more “niche” suite of real assets. Especially where, through the continuing decline of participation in private pension funds, investors must increasingly fend for themselves, sponsors sense a deep responsibility in being entrusted with their funds.

The purpose of the foregoing is not intended to dissuade anyone from trying to raise an institutional fund. Historically, the majority of my firm’s clients do wind up seeking institutional capital as part of their strategy, or even the entirety of it.

It is not to be disregarded. And publicly traded REITs have their place, for both sponsors and investors. But not every sponsor is aware of the retail channel and its significant potential benefits. Some are aware, and have been using the channel for years. Others enjoy long track records in the institutional space and are entering the retail space for the first time. Still others have never heard of the retail opportunity, but once they hear about its size and other benefits, are keen to explore it. I hope that this writing serves as a useful, if brief, guide to all of them.

1—Evan Hudson is a partner at Stroock & Stroock & Lavan LLP, a leader in real estate investment programs.

Mr. Hudson wishes to thank Jonathan Labib, Associate, Stroock & Stroock & Lavan LLP, for his assistance in preparing this article.

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ADISA

News

Events

2018 ADISA Spring Conference Wrap-Up ADISA Advocacy ADISA Foundation News ADISA 2018 Alternative Investments Research & Due Diligence Forum

ADISA’s 2018 Spring Conference Wrap-Up At the end of March, ADISA welcomed approximately 600 alternative

Also speaking at the Industry Update session was Mike Huisman

and direct investment industry professionals to its 2018 Spring

with DST Systems, Inc., who, with data approaches never before seen

Conference in Orlando, Florida. Among the educational topics

in this conference’s setting, reported on interval funds, non-traded real

discussed at the event were Section 1031 exchanges, tax reform, real

estate investment trusts, daily net asset value REITs and non-traded

estate investment trusts, business development companies and more.

business development companies. Huisman reported that:

More than 90 professionals spoke and participated in educational sessions over the course of three days. Rudy Giuliani, 107th Mayor of New York City (1993-2001) was a keynote speaker at the event, along with Marilyn Mohrman-Gillis, Executive Director of the CFP Board Center for Financial Planning and best-selling author, executive business coach and world-renowned sales trainer Cheri Tree.

“The ADISA 2018 Spring Conference was a tremendous success and we thank everyone who attended and participated in what many

• Approximately 55 percent of the investors in these product types were new in 2017, while 45 percent were returning investors.

• The average age of the investor in our sector is 68 years old.

• Ticket size is increasing in the IBD and RIA channel and decreasing in the wirehouse channel.

• The number one move was to investors participating in daily NAV REITs.

consider to be the kick-off event of the year for alternative investments

As to the Impact on Commercial Real Estate session, Randy

education,” said John Harrison, ADISA’s executive director. “Attendees

Anderson, Ph.D. with Griffin Capital Asset Management, reported that:

get a significant amount of information, experience a range of viewpoints, and interact with each other.”

At the Industry Update session, Taylor Garrett with Mountain Dell Consulting reported on Section 1031 exchanges. Facts from the report included:

• Real estate fundamentals are strong with contractual rent growth in place and a tailwind from economic expansion.

• As a result of tax reform—potential GDP growth, which leads to employment growth, increases demand across all property types; and the deductibility of interest expenses and preservation of the

• In 2017, sponsors raised $1.94 billion total equity and fully

1031 exchange rule are very favorable for real estate. Additionally,

subscribed 94 Section 1031 offerings

the REIT structure still maintains a tax benefit over other structures.

• Of the equity raised, multifamily properties accounted for 54 percent, while retail was closest behind at 19.2 percent, and office was third at 16.12 percent.

“ADISA conferences bring together the nation’s leading alternative investment professionals to learn the latest industry trends, marketing recommendations and current regulations,” said Harrison. “We are

• Approximately $583 million has been raised thus far in 2018 and

strongly looking forward to continuing the educational momentum

the outlook projects the total equity raise could reach $2.5 billon.

at our two remaining events this year—the Alternative Investments

• The demand for multifamily offerings is expected to continue,

Research & Due Diligence Forum in New York City this July and our

and supply has reportedly kept up.

2018 Annual Conference & Trade Show in Las Vegas this October.”

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ABOVE top to bottom: Marilyn Mohrman-Gillis delivers her presentation—Diversity-Dividend: Why You Should Invest in Her Back by popular demand, Cheri Tree delivers her speech—How to Grow Sales and Relations Immediate-Past President John Grady, DLA Piper, and current President Keith Lampi, Inland Private Capital Corporation, presents the Best Session of 2017 Award to Mike O’Toole, AEI Capital Corporation, and Dave Laga, DFPG Investments. Other members of that panel were Rahul Sehgal, Inland Private Capital Corporation, and Joe Nugent, Effective 1031 Planning.

RIGHT: ADISA welcomed approximately 600 alternative and direct investment industry professionals to its 2018 Spring Conference in Orlando, Florida.

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ADISA Spring 2018 Advocacy Update ADISA Comments on California Assembly Bill No. 2529 In April, ADISA wrote a comment letter to the California State Assembly urging them to use extreme caution in adding additional up-front tax burdens on Section 1031 Like-Kind Exchanges.

Since 2014, ADISA has been involved in research into and communication about LKEs at the national level, and our role as an association of investment professionals gives us perspective on LKEs and, in particular, how any changes in the 1031 tax treatment would affect investors.

ADISA Submits Comment on FINRA Notice 18-08 FINRA’s office of the corporate secretary recently sought comments on the proposed Rule 3290, which would replace FINRA Rule 3270 (Outside Business Activities of Registered Persons) and FINRA Rule 3280 (Private Securities Transactions of Associated Persons). To properly prepare for response, ADISA surveyed its members who are broker-dealers, investment advisers and others, regarding FINRA’s proposed new rule on outside business activities, and found that the membership is strongly in favor of adopting the Proposed Rule and rescinding FINRA Rules 3270 and 3280.

ADISA Foundation News At both ADISA’s 2017 Annual Conference and 2018 Spring Conference, ADISA showcased a silent auction in the Exhibit Hall, where attendees could bid on a variety of items such as sports memorabilia, vacation packages, entertainment, music, wine packages and much more. Proceeds totaled $3,400 at the Annual Conference and nearly $5,000 at the Spring Conference!

The Foundation’s mission is to assist with scholarships and special projects to grow the study and appreciation of the alternative and direct investment space, and has historically had a strong partnership with Utah Valley University’s Woodbury School of Business. ADISA Foundation President Brandon Balkman, Orchard Securities, represented ADISA at Utah Valley University’s annual banquet this past spring.

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ADISA Submits Letter-to-the-Editor of the Wall Street Journal ADISA has submitted the following letter-to-the-editor of the Wall Street Journal in response to the publication’s May 7th article, “A Private-Market Deal Gone Bad: Sketchy Brokers, Bilked Seniors and a Cosmetologist.”

Read the letter below:

Jean Eaglesham and Coulter Jones’ May 7th article, “A Private-Market Deal Gone Bad: Sketchy Brokers, Bilked Seniors and a Cosmetologist” does an admirable job of chronicling the alleged Woodbridge Ponzi scheme.

Unfortunately, rather than simply report on the particulars of that lamentable incident and the interesting peculiarities surrounding it, the article employs a remarkably broad brush to paint private placement securities offerings and the financial advisers that recommend them as “sketchy.” Indeed, the article goes so far as to present a presumably scientific analysis to determine that such advisers are far more likely to be scofflaws than those that do not offer such offerings to their clients. Of course, this analysis is anything but scientific—it is a shallow and simplistic vehicle used to reach a predetermined conclusion.

The fact of the matter is that private placement securities offer high net worth investors valuable opportunities to participate in alternative investments that can provide important diversification and potentially significantly higher yields to their portfolios. Of course, such investments may sometimes involve greater risk than government bonds or index funds— which is why they are statutorily restricted to accredited investors.

Additionally, of the more than US$70 trillion in global AUM, upwards of 14 percent is in alternatives, with a significant portion of that in private placements. There are thousands of advisers throughout the country successfully employing alternative investments to help their wealthier clients reach their investing goals. In doing so, they are simply providing their clients with investment options in alternative asset classes that have been embraced by the most sophisticated institutional investors for many decades. Furthermore, we cannot imagine a vibrant economy without the essential funds for small business, new projects, jobs, and growth that private placements provide.

Of course, there are bad actors in the securities world, just as there are in every industry. To use a particularly galling example to disregard an entire class of investment offerings and those who recommend them is unfortunate, foolish and dangerous—particularly coming from the nation’s most respected financial newspaper.

Investors should always be cautious, both in selecting their investments and those who assist them in managing their wealth. There are countless thoughtful, intelligent and licensed wealth advisers available to the investing public—a growing number of whom appropriately recommend well-structured and well-managed private placement investments.

Sincerely, John Harrison Executive Director ADISA (Alternative & Direct Investment Securities Association)

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KEYNOTE SPEAKER BOB RICE Bob is the country’s most recognized expert on mainstreaming alternatives. His provocative, high-energy presentations show why, in today’s environment, non-traditional investments are

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essential components of individual portfolios… and how

He is a Director of Nasdaq

the entire financial industry is changing to deliver them. His

Private Markets; a senior consultant to Wilshire Associates

insights arise from 30 years’ experience as a lawyer, banker,

and Neuberger Berman; and serves on the board of the Value

and consultant for elite institutional investors, asset managers,

Line Funds’ investment advisor and the editorial committee of

and financial advisors.

The Institute of Wealth and Investments.

Bob is the pioneer educator in our field: his foundational

Bob’s firm, Tangent Capital, advises private equity, hedge, and

book The Alternative Answer became a Wall Street Journal

real asset managers and institutional investors. RicePartners.

bestseller, and his Bloomberg and Fox TV spots, “Bob’s

com hosts Bob’s recent award-winning articles, presentations,

Buzzword,” have explained the lexicon to millions of viewers.

events calendar, and a library of his TV Buzzwords.

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11:50 am-12:40 pm Alternative Investments Sector Report Timed overview presentations from our best experts giving the current status of important sectors in our space: syndicated 1031s, energy, private equity, interval funds, non-traded REITs, BDCs, plus summary-aggregated sales data.

Presenters: Mike Huisman, DST Systems; Taylor Garrett, Mountain Dell Consulting; Bob Rice, Tangent Capital Partners; Matt Iak, U.S. Energy Development Corporation 12:40-2:10 pm Lunch & Exhibition

SCHEDULE TO DATE AS OF 6/13/2018

TUESDAY, JULY 10 7:45-8:30 am Breakfast & Exhibition 8:30-8:45 am Welcome & Introductions Mark Kosanke, Concorde Financial, AI Research & Due Diligence Forum John Harrison, ADISA Executive Director 8:50-10:10 am Alternatives in Action Overview This session will offer a broad view of the function, portfolio design and options for various alternatives in our space for the wisest investments.

Keynote Speaker Bob Rice, Tangent Capital Partners 10:15-10:45 am Break & Exhibition 10:45-11:45 am Who’s on First?

The BD, FO, RIA Scorecard What are the best roles for broker-dealers, family offices and RIAs in the sales chain for alternatives, and how do they relate to each other, the sponsor and the investor?

Panelist: Ann Moore, International Assets Advisory

2:10-3:20 pm Tax Demo and Fully Cycle of Events Debate A live tax return walk-through of a 1031 Exchange from start to finish. We will show the various forms, depreciations schedules, and explore the implications of a full cycle program. The session will end with a conversation on the treatment of “rolling” into the next DST and what that may look like, particularly when it involves multiple properties.

Presenters: Mark Kosanke, Concorde Investment Services; Steve Meier, Seyfarth Shaw 3:25-3:55 pm Break & Exhibition 4:00-4:55 pm Love It or List It: The Great Buy or Sell Debate Top real estate experts from industry sponsors take you inside their decision making committee room to illustrate how discussions proceed on whether to buy or sell particular real estate. Decisions involving DSTs, REITs, and other private placement programs are illustrated.

Using sample properties, the panel will discuss why to buy, why not to buy, what to look out for, when to list and sell, is the property more appropriate for a REIT or multi-property portfolio or a single property DST. This panel hopes to give the due diligence community a look into their ultimate selection process, and why they love it or why they list it!

Debaters: Tom Jahncke, Passco Companies; Michael Phillips, Phillips Edison & Company 5:00-6:30 pm Welcome Reception & Exhibition

WEDNESDAY, JULY 11 7:30-8:30 am Breakfast & Exhibition 8:00-8:55 am Broker-Dealer Advisory Council (Broker-Dealers only) 9:00-9:55 am Legislative & Regulatory Updates Review of the latest issues, including the latest tax reform effects and ongoing practices.

Moderator: Catherine Bowman, The Bowman Law Firm Panelists: Tom Rosenfield, Hillstaffer; Larry Sullivan, Passco Companies 9:55-10:45 am Alts Due Diligence—Skills on Display Knowledge tests for alternative investments due diligence—participatory drill-down on how due diligence is best done in our space.

10:45-11:15 am Break & Exhibition 11:15 am-12:10 pm Ask the Experts Alternatives due diligence experts will answer all of your questions.

Panelists: Dana Woodbury, Buttonwood Investment Services; Scott Smith, FactRight; Catherine Bowman, The Bowman Law Firm; Bryan Mick, Mick | Law 12:10-12:25 pm Closing Remarks Mark Kosanke, Concorde Financial, AI Research & Due Diligence Forum Chair

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SAVE THE DATE

10401 North Meridian Street Suite 202 Indianapolis, IN 46290

ADISA 2019 SPRING CONFERENCE APRIL 1-3 MARRIOTT SAN ANTONIO RIVERCENTER

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