What special investments, if any, do CFPs have access to?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
K8ya
Posts: 51
Joined: Fri Aug 10, 2012 12:48 am

What special investments, if any, do CFPs have access to?

Post by K8ya » Wed Sep 13, 2017 11:19 am

As a marketer I've been doing some work for a CFP who mentioned in his prep document that some do it yourselfers can be encouraged into taking his services when they learn he has access to investments that the public does not. It wasn't an area I needed more info on so I didn't inquire further. But he doesn't seem like the salesy type (rather straight arrow actually).

Anyone know what he's talking about? Do these alternative investments ever have any true investment value for types like us or is it exotic nonsense?

User avatar
nedsaid
Posts: 8717
Joined: Fri Nov 23, 2012 12:33 pm

Re: What special investments, if any, do CFPs have access to?

Post by nedsaid » Wed Sep 13, 2017 11:26 am

DFA funds are difficult for individuals to access without an advisor. Stoneridge Funds need certain advisors to access. Some AQR funds need advisor access though some are available through places like Fidelity brokerage. Other things like private equity, non-traded REITs, structured notes need advisor access.

Many advisor only investments are more trouble than they are worth and are often quite expensive. I would avoid private equity, non-traded REITs, structured notes, hedge funds, stuff like that.

I am pretty enthusiastic about DFA or Dimensional Fund Advisors. Stoneridge funds recommended by certain advisors are semi-liquid and I would rate these as a maybe. AQR Funds from Cliff Asness' is another maybe, not super enthused about the use of leverage and shorts.
A fool and his money are good for business.

User avatar
Alexa9
Posts: 406
Joined: Tue Aug 30, 2016 9:41 am

Re: What special investments, if any, do CFPs have access to?

Post by Alexa9 » Wed Sep 13, 2017 11:32 am

+1 for DFA. The only one worth an advisor. Note that you can usually use an advisor to purchase and then drop the advisor if they charge excessive fees.

JBTX
Posts: 1522
Joined: Wed Jul 26, 2017 12:46 pm

Re: What special investments, if any, do CFPs have access to?

Post by JBTX » Wed Sep 13, 2017 11:34 am

I think there are certain Fidelity Advisor funds available to advisors only.

User avatar
nedsaid
Posts: 8717
Joined: Fri Nov 23, 2012 12:33 pm

Re: What special investments, if any, do CFPs have access to?

Post by nedsaid » Wed Sep 13, 2017 11:37 am

JBTX wrote:
Wed Sep 13, 2017 11:34 am
I think there are certain Fidelity Advisor funds available to advisors only.
The Load fund families are advisor access only like American Funds or you can buy with a load through a discount brokerage. American Funds used to sell only through advisors but I noticed that they have no-load versions of some of their funds available at certain discount brokerages. So you don't even have to pay a load for certain funds that are otherwise loaded.
A fool and his money are good for business.

alex_686
Posts: 2548
Joined: Mon Feb 09, 2015 2:39 pm

Re: What special investments, if any, do CFPs have access to?

Post by alex_686 » Wed Sep 13, 2017 11:46 am

K8ya wrote:
Wed Sep 13, 2017 11:19 am
Anyone know what he's talking about? Do these alternative investments ever have any true investment value for types like us or is it exotic nonsense?
Mostly it is access to exotic bespoke stuff. Limited partnerships, hedge funds, private REITs, exchange funds, etc. So not for the average folk. These things can add value, a FA can add value, but there are many snake oil sales people out there.

JBTX
Posts: 1522
Joined: Wed Jul 26, 2017 12:46 pm

Re: What special investments, if any, do CFPs have access to?

Post by JBTX » Wed Sep 13, 2017 12:17 pm

One thing some advisors were hot on are limited partnership shares in oil and gas drilling and pipelines. There are certain tax benefits these ventures get such that in the right circumstances, it can spit off some decent income and generate some nice tax offsets (depreciation/depletion, etc) that are allowed to flow through your income.

I know people that did this, and it was working rather well. At least until oil prices crashed. Now they are spitting off minimal income. Plus some of these things are in multiple states so you end up having K1-s in all the applicable states, which is a tax PITA.

User avatar
nisiprius
Advisory Board
Posts: 34168
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: What special investments, if any, do CFPs have access to?

Post by nisiprius » Wed Sep 13, 2017 12:32 pm

Oops, sorry--this is duplicating what nedsaid already said.

Just as Frontline flea and tick prevention medicine is only supposed to be available through veterinarians, a number of mutual funds are only supposed to be available through "selected advisors." And just as it's possible to buy Frontline without going through a veterinarian, forum participants have been creative about finding avenues for buying these mutual funds without paying an advisor. Nevertheless, they're supposed to be advisor-only.

In addition to DFA, I would also mention:

Many AQR funds:
AQR funds closed to all except selected advisors
Image

Stone Ridge funds
Stone Ridge Funds are generally sold only to (i) institutional investors, including registered investment advisers ("RIAs"), that meet certain qualifications and have completed an educational program provided by Stone Ridge Asset Management LLC; (ii) clients of such institutional investors; and (iii) certain other eligible investors.
Last edited by nisiprius on Wed Sep 13, 2017 12:35 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
nisiprius
Advisory Board
Posts: 34168
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: What special investments, if any, do CFPs have access to?

Post by nisiprius » Wed Sep 13, 2017 12:34 pm

Another category of "advisor only" products are non-traded REITs. These are famously problematical investments that are attractive to advisors because they pay high commissions.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
Meg77
Posts: 2093
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX
Contact:

Re: What special investments, if any, do CFPs have access to?

Post by Meg77 » Wed Sep 13, 2017 12:55 pm

Lots of investment advisors have access to investments that the general public does not. It has nothing to do with being a CFP but more to do with how many assets under management an RIA or firm has and whether they've engaged with asset managers who provide access to those investments.

Some of the bigger firms can get clients into IPOs and institutional funds run by their companies which can have very high minimums. They also provide individual bond offerings and may have preferential access to new individual bond offerings.

I am a CFP and a member of the Financial Planners Association which is made up mostly of small RIAs and firms run by a single or a few individual planners. There are various asset managers who sponsor our events who offer smaller investment advisors access to investments their clients couldn't get on their own. For example some of the firms simply have proprietary mutual funds of various strategies (Vanguard is a sponsor too), but others offer access to private equity investments or commercial real estate partnerships. Individual investors may have to be accredited and face a six figure minimum to participate on their own. But an advisor can be allowed to create a pooled fund so she can offer the opportunity to her clients at a much smaller minimum.
"An investment in knowledge pays the best interest." - Benjamin Franklin

User avatar
nedsaid
Posts: 8717
Joined: Fri Nov 23, 2012 12:33 pm

Re: What special investments, if any, do CFPs have access to?

Post by nedsaid » Wed Sep 13, 2017 1:13 pm

Meg77 wrote:
Wed Sep 13, 2017 12:55 pm
Lots of investment advisors have access to investments that the general public does not. It has nothing to do with being a CFP but more to do with how many assets under management an RIA or firm has and whether they've engaged with asset managers who provide access to those investments.

Some of the bigger firms can get clients into IPOs and institutional funds run by their companies which can have very high minimums. They also provide individual bond offerings and may have preferential access to new individual bond offerings.

I am a CFP and a member of the Financial Planners Association which is made up mostly of small RIAs and firms run by a single or a few individual planners. There are various asset managers who sponsor our events who offer smaller investment advisors access to investments their clients couldn't get on their own. For example some of the firms simply have proprietary mutual funds of various strategies (Vanguard is a sponsor too), but others offer access to private equity investments or commercial real estate partnerships. Individual investors may have to be accredited and face a six figure minimum to participate on their own. But an advisor can be allowed to create a pooled fund so she can offer the opportunity to her clients at a much smaller minimum.
Meg, this is an excellent post. You bring up a great point about access to institutional class funds.

I don't want to say that all illiquid or semi-liquid investments are bad, just that investors should be wary. One needs a high level of trust with the advisor and philosophical alignment and plenty of liquidity elsewhere. These private type of deals are something I have no experience with as I am a really small fish in the investment world. I would like to hear more about how such things as private equity and commercial real estate partnerships have worked out for retail investors in real life, a whole lot of things sound good on paper.

One overlooked thing is access to great seminars. I had a great experience seeing Mary Farrell of Wall $treet Week fame twice as well as seeing a respected Wall Street economist in person. I also got to see Jeff Auxier speak as well. These can be very informative and a fun way to spend an evening. I do feel a bit like a big shot visiting these seminars.
A fool and his money are good for business.

User avatar
David Jay
Posts: 3992
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: What special investments, if any, do CFPs have access to?

Post by David Jay » Wed Sep 13, 2017 3:09 pm

nisiprius wrote:
Wed Sep 13, 2017 12:34 pm
Another category of "advisor only" products are non-traded REITs. These are famously problematical investments that are attractive to advisors because they pay high commissions.
Love your phrasing
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Post Reply