The iSelect Approach for Financial Advisors
Regulations, uncertain markets, monetary policy, and a thousand other factors are making it ever harder for financial advisors to offer their clients reliable investment strategies to meet their retirement goals. Retirees are watching retirement savings dwindle. Millennials don’t believe the S&P 500 is reliable. Few people trust Social Security to provide meaningful retirement benefits. It has become difficult for financial advisors to provide clients with solutions that offer real long-term returns.
iSelect is working to solve this problem.
Looking for Alternatives
Many accredited investors and their advisors who are seeking consistent, risk-adjusted returns that are uncorrelated to the market are looking to alternative investments. This category of assets grew at an 11% CAGR over the last decade. Indeed, a survey found 43% of financial advisors expect to increase client allocations to alternatives within the next 12 months, and 78% agree or strongly agree that alternatives are a critical component of overall asset allocation. Alternatives are expected to account for up to 50% of net new revenues in U.S. retail asset management by 2020.
The Case for Venture
Venture capital (“VC”) funds, one of the various types of alternatives, are investment funds that manage money from investors seeking equity stakes in privately held startup, small- and medium-size enterprises with strong growth potential. These investments are high-risk/high-return opportunities.
The iSelect Solution
iSelect is working to help average accredited investors to invest as little as $5,000 into individual, carefully vetted venture deals. Because financial advisors want better solutions for their clients, we built iSelect for RIAs and BDs. We invest in the same deals as leading venture capitalists, we just make it easier for the average investor to get in on the action.
An investment in iSelect Fund is diversified across a series of new businesses, each of which is subjected to our extensive three-tiered due diligence process, which includes review by a FINRA compliant broker-dealer, our Venture Team, and our industry-specific Selection Committees. This process addresses the following fundamental questions about each investment:
- Is the venture commercially ready for business?
- Does the venture have the ability to create the barriers of entry necessary for a sustainable competitive advantage?
- Is the management team in place capable of growing the business responsibly?
Each company’s profile is summarized and packaged into an extensive diligence file that is made available to investors for detailed evaluation. Post-investment, iSelect requires each company to provide monthly reports, so investors can monitor the progress of their portfolio.
The population is aging, that much we know. But it’s the implications of this for individuals that should really have the attention of financial advisors.
I recently participated in a panel discussion at Worth magazine’s 2017 Power 100 Summit in Greenwich, Conn. Titled “The New Landscape of Power,” the event was a deep dive look from the investor’s point of view at everything that has happened in the last year — from the rise of populist politics in the U.S. and Europe, to Blockchain, climate change and more.
An issue with government subsidies, whether in IT or energy, is that they suppress the natural forces of innovation that would otherwise drive growth.