How Financial Advisors Use Real Estate to Help Their Clients 2

Welcome listeners. You're listening to the Deeds in the Desert, where real estate investors tune in for the latest news. Hello, welcome back to Deeds in the Desert. I am joined today with Misty Bethany, our Chief Compliance Officer. And didn't we just do a podcast a little while ago? We did. You had me back and everything. I know, crazy thing. Well, we got some good comments from the last one. Yeah. So today we're going to talk about registered independent advisors and how they work with Ignite funding. So I've actually created a list of questions. And the reason why I'm going to look through these questions, I don't want to miss anything. And Misty works with all of our registered independent advisors that we work with. And let's kind of get into this because I know that recently I've also gone to an event and we want to touch on that as well. And I met a lot of independent advisors there. And I got to be honest, this podcast is the reason why we're doing it. They did not know a whole lot about the opportunity in alternate investments. But I think they recognized with the market volatility that they need to start learning a lot more about alternate investments. And that's why they became an RIA to begin with. Isn't that crazy? It is. It's absolutely not. So let's talk about just really quickly from an RIA perspective, because there are some groups that we cannot work with and there's reasons why we can't. So kind of run me down when an RIA comes to us or they believe they're an RIA because we've had that situation as well. What kind of review are you doing to make sure that they actually are an RIA? What do we look for? So we look to make sure that they are actually, so RIA, registered independent advisor. So we make sure that they're actually registered to provide financial advice. So we go to SEC, we look at the firm's history, the actual individuals. And as long as everything checks out there, that's good. But like you said, we have a lot of individuals who they may work in some other line where they're not actually registered to give financial advice. And we cannot work with those individuals, unfortunately. We are very strict and compliant in that regard. We are. And the reason we have to be is because they're giving financial advice. Giving financial advice. Outside of the norm. And often charging. Often charging, yes, yes. Of course they would, right? That's how they get paid. But when they give advice about Ignite funding, what do they give as far as advice? How does that work behind the scenes for them? Just to kind of help them understand. So at least the firms I work with or I have talked to, right, that have expressed interest in finding out more about us, they really are looking at Ignite because they want something, they want an alternative. They want an option outside of the market. They're very familiar with the market. Yeah. And they're looking for something they don't know about. They're looking for some secret sauce kind of thing. Yes, yes. But they don't know anything about us. And they're skeptical too because they're like, well, this is so great. Yeah. Why haven't I heard about it? And so, you know, they come to us first, they want education. And, you know, it's so simple that even then they're skeptical. They're like, really? Yeah. They usually, you know, dip their own toes in the water before then venturing out. Yeah. Can you imagine right now being a financial advisor? No, I'm glad I left that industry years and years ago. Because it's rough. It's, you know, every time the market goes down, they're getting calls. Yes. They're getting calls or they're having to make the calls. Or they're having to make the calls. And they're having to make the calls. So I think, and maybe I'm wrong, but just talking with some of the groups that we work with, why do you think they started working with Ignite Funding? Transparency, right? Because we do due diligence on them, but they're doing it on us. They are handling people's portfolios. Yeah. And so when they start to dive in and look and they are talking to me, they want to know who we are, what we do. And they are shocked that everything that I tell them is for them to look at independently, not only on our website, but they can go to the state and they can ask for, you know, the financials, all of those things. So they come to us because they're intrigued. They want an alternative to the market, but they stick around and they start bringing on more and more clients because of what they see when they reach out and talk to us. Okay. So let's talk through this. You're an RIA. Yeah. We're going to do some due diligence. We're going to do a verification that you actually are an RIA. Yes. That you are registered. Yep. Then we are going to have some communication with you about, from an RIA perspective, about our entire investment portfolio, our platform, how it works. Yep. But as an RIA, my job is to take care of my clients. Yes. And so how do we onboard clients from that perspective? Because as an RIA, you know, it's kind of a hands-off. Don't talk to my client. It's my client. And I think that's probably the biggest hurdle we have to get over. So how do we make sure that because they become our client as well, but how do we make sure that we have that arms-length transaction? It's a double-edged sword. Yeah. But, you know, that's one of the things that I think that, again, they are pleasantly surprised when they find out about us. From the onset, I say, listen, we recognize these are your clients. We are not looking to take your clients. And that is a big concern that they have is that once the clients experience Ignite, they're going to say, I don't need you. I don't need you. Yeah. And, you know, we've had in, how long have we been doing this? Like 15 years, right? We've had maybe five, five investors who have tried to go that route. Veer away. And I shut them down immediately. We respect and honor the partnerships with our RIAs. Yeah. And so the thing I tell them from the very beginning and that I enforce throughout is I will communicate at the onset of that relationship. I want to make sure the client knows who we are, what we do, and who to contact if they have questions that they can't get ahold of their advisor. But beyond that, I really respect what the advisor and their client puts in place in terms of communication. And so we don't reach out to the clients except for a few instances. If there's something that, you know, is important about one of their investments, they and the client are both notified simultaneously. Yeah. And, you know, I have never had anything but good response from our advisors in that regard. And the clients too, honestly. Yeah. How can they make the investments on behalf of the client? Well, it's, again, it comes down to education, right? So we, we send out the information, we call the RIA advisor, we let them know about all the different loan options. Based on that, they are selecting loans on behalf of their investors because the investors have given them the ability to do that. People that work with RIAs typically are very busy, they're professionals. They do not want to make another decision in their life, right? They want to hire the pros to do that. So these are people that are managing their entire portfolio. And so it's... Yeah, it doesn't stop at stocks, bonds and mutual funds. Absolutely not. It goes way beyond that. It's diversification in there, so. They could be helping them with, you know, their trust. They could be helping them with legacy. And like they are. Insurance. Absolutely. All of those things. Yep. So it doesn't have to end, stop or end with just that. It can go into the alternative world. But as an RIA, if I'm taking my funds away from, you know, the fidelity, right? Let's say I'm hitched to fidelity and fidelity pays me like clockwork every month, quarter, however they have it set up. What happens when they pull those funds out and then investment alternatives? How do they get paid then? Well, I mean, there's so many different ways that we can structure it. And it really is between the RIA and the client. But, you know, if it's a cash account, I mean that their interest payments go right, can go right back to fidelity if that's how they want it to go. It can go to their individual checking or savings. If it is an IRA, they just would set up an account with a self-directed IRA. And that's where the income and the principal goes. And we can, we have some groups that direct bill through us, right? And then some that it goes back to the Charles Schwab and they do, you know, a quarterly asset under management bill. So we can help facilitate either one of those. Yeah. They're all set up different and we recognize that. An RIA, you know, the reason why they're an RIA is because they wanted the flexibility. They wanted to be able to have these options. So if you became an RIA, then why aren't you fully deploying all of your options that you now have available to you? The biggest one being alternatives. And, you know, if you're going to preach that you diversify your client's portfolio, then you better will damn well be doing it. Absolutely. And so we're an interesting, interesting piece of that puzzle that I think a lot of RIAs are looking for, but just they're scared to do it. They're scared. They don't. So how do they do their due diligence on us? I guess is what I'm trying to say. Well, you know, I mean, like I said, we're very transparent, so you can bet that. But there's still a level of trust that they have to take, right? They have to make that leak. Investments have risk. All investments have risk. And what I always recommend when I'm sensing that hesitation from, you know, an RIA firm is open an account for yourself. Start with the minimum. Test us out. Yeah. See if what I'm telling you is true. Yeah. And the ones that do that, they've been with us for years now. I think all of ours have done that. Yeah. I can't think of any that haven't actually. Yeah. I mean, if you're managing somebody's funds, you want to know what the process is. You want to know what the process is. Exactly. So kind of walk me through what an RIA should expect for a process, because it is slightly different than an investor. Yeah. So what should they expect from, okay, I have tested this out. Now I'd like to bring on my client. Absolutely. How exactly is that going to work with them? And then what kind of reporting do you get? Give me the full scope of what it would look like. Yeah. So let's say you're an RIA and you you've been testing it. You're comfortable with Ignite as the product, right? And the service. So now you're ready to bring on a client. So it's as simple as go on the website with the client in the office. If that's what you choose to do, they fill out the application. It gets submitted. Now, depending on the relationship that the RIA has with the client, there could be which is a limited power of attorney. And in that, that is a document that we can certainly help give you a template for if you're an RIA. But it really is a document between the RIA and the client. And it allows the client to give the RIA authority to sign on their behalf, maybe select the investments, take a fee, speak on their behalf. It could be any combination thereof. So that comes in with the application. We open the account when I speak with the client. And often the RIA is on that call too. Yeah. Again, completely between the two of them as to who should be on the call. Yeah. But that initial introduction, again, these, like you said earlier, there are clients as well. Yes. So I want to make sure the client knows everything that they're going to expect. Yeah. What's the risk? Yeah. We have liabilities as well. We have to cover all. Yep. And client has an opportunity during that call to ask any questions they have. Nothing is off limits for them. And once we have that call, the account is active and they start selecting investments with their advisor. And that's, it's as simple as that. Now, when that account gets opened, it automatically is viewable on the RIA's login to the website. So as an RIA, you're going to log into the website. You're going to be able to see all your clients there, all their account details, the same information a client sees when they log in to their own portal, the RIA has access to. Yeah. So they will have access to, if they want to access their tax reporting, to pull that down, to provide it to the client. So the client never wants to log in. They don't have to. That's okay. Absolutely. They have the option to do it. But ultimately, if, you know, if, if you're a really solid financial planner, RIA, you're doing that for your client, right? Yes. That's part of the fee associated with servicing the client. And so we wanted to make sure that when we built our program, we made sure that we were really thinking about our end user. And in this case, our end user is the RIA and they needed access to the same thing that a client has access to. So they can also see exactly what they're being paid. They can see exactly what they're being paid. And the other thing is, you know, they, they don't lose access to me or to my client services team that works directly with me. So, you know, if there's something that they need, a report that they need that they can't find, we get it out. Yeah. Let's talk risk. Well, cause this is reality. Yeah. Risk is, is, is a reality in any type of investment. I always tell individuals, it's not a matter of if they'll be involved in a default, it's a matter of when. So there actually is a secondary period of time where we do interact with the client as part of our compliance. We have to make sure clients know when there's a default because none of us like to deliver bad news. None of us do. And so one of the things that we do from the funding standpoint is we help in the delivery of that. So walk me through what happens when one of their clients is involved with a default. So default occurs, the RIA is notified, of course, as to what's going on. It's actually, there's no, there's nothing different in what I'm telling the RIA is what we're telling the client. So the information there is the same and it's everything that we know and can communicate, right? But at the same time, the same day, that client is also being given that same information. And if there's a ballot where a client has to make a decision, then based on the agreement they have, the RIA can sign a ballot on their behalf. The client will also get the same ballot and can sign that ballot. And our policy, and I tell the RIAs from the very beginning, is if the client signs a ballot, we take the client's ballot over theirs because they are the client. Yes. Completely makes sense. All right. What am I missing? From an RIA perspective, what else do they need to know? Obviously they can look at our product online. They can look at all that. So this podcast wasn't intended to be like, what is a trustee investment? But maybe we should touch on that for just a minute because from an RIA's perspective, walk me through the documentation that they're receiving on these investments. Just kind of give me an idea because they're receiving some of this documentation. Is that correct? They absolutely are. So what are they getting? What should they do with it? Is this something that they should file away? And the reason why I'm bringing this up, I know you know where I'm headed. I do. Is because RIAs are audited from time to time. They are. And when they are, we are. So talk me through some of that documentation, what they should be keeping from the trustee investment perspective. Well, here's the thing. They should be keeping, if I'm sending an email or Knight's sending an email, those should be retained in a folder, maybe labeled by the investment until that investment pays off. And then, you know, depending on what their guidelines are with their regulators, obviously keep that. But they are, these are collateralized real estate investments. So what they're receiving pertains to the collateral. So they're receiving the recorded deed of trust. It's going to have their client and the client's percentage of interest on that property. They definitely want to keep that. Insurance, title policy, all of those things, very important to keep records of. Now, as you know, sometimes emails get missed or maybe, you know, accidentally deleted. We have all that stuff. So how many audits have we helped with where we've gone back in time to provide that information? Of course we can do that. Absolutely. And I know we're working on some improvements, so it'll be even easier to access that information, which will be great as well. Yeah. We will be launching our loan repository pretty soon on our client portal. So all of that information will be available right there on the portal. We won't have to, I think these examinations or these audits have taught us that, you know, our expectation is that when we send the documentation out, that clients have this beautiful filing cabinet of electronic files that they're keeping. But the reality is, is, you know, sometimes we lose things from time to time. So we wanted to make sure that that was available during the duration of the loan. So they will be there during the duration of loan. But when you're doing an audit, you know, they have a look back period. So you want to make sure that you have that as well, because we will not be keeping that in our archives on our client portal, but definitely want to make sure that they have that information. Absolutely. All right. What else? Have I missed anything else? I mean, I think the biggest question that I get from RAs is what's the risk? Yeah. Well, this is what I say to them and to the clients when I'm doing that initial call with them. There's basically two risks. One is a borrower could stop making payments. So you're not during that time getting the monthly interest payment and the borrower could just not be able to pay off the loan. And we have to take the property back through foreclosure. Yeah. But ultimately at the end of the day, they are recorded on that property. And if we take it back through foreclosure, they're still going to retain the same percentage of interest as an owner of the property as they did as a lender to the loan. So that's really it. And then the next question is, can I lose all my money? You're talking to a compliance officer, so she's never going to say, no, absolutely not. But again, it's collateralized real estate. So pretty secure in terms of there always being some value to property. Yes. You know, I did get a question when I was at the event that let's talk about it because their goal as an advisor is to have a very diversified portfolio. And if they're going to move into an alternative nine times out of 10, it's going to be real estate related. It just is. That's the second highest investment class that's out there. And so with that being said, can they create a real estate portfolio diversified enough here at Ignite or will they need to incorporate multiple companies like ours to do it? How would you answer that question? I would say they don't need to incorporate multiple companies to do that because, and I say this all the time, diversification upon diversification. So they're coming to Ignite for diversification. Well, within Ignite, you don't want to put a client's eggs all in one basket, meaning one loan or one borrower. So you have the option to go with multiple borrowers, multiple locations, different states, different asset types. And that's what I recommend. If a client comes to you and has $100,000 to invest, ideally for me, they'd be in Yeah. Agreed. You know, diversify. Yeah. It's more paperwork, but it's diversification. It's more paperwork. That's their job. Yeah. And if you're looking for monthly income, right? And you've got 10 loans. Yeah. One, maybe two might go into that default where they're sitting on the sidelines for a little while on that loan, but the chances of all of them going into that situation, highly unlikely. So they're going to be able to keep the income stream coming, which is why they're likely investing or looking for that kind of investment for their clients. Okay. Does every RIA work directly with you? Yes. Okay. You heard it there. You get Misty. And she has staff that works with her, but every RIA comes through Misty. Like that is one thing that we want to make sure that we're working with the right groups. And I say the right groups because we really want to make sure that you understand the risk because ultimately you have to understand the risk just as much as your investor does. So you've heard it first here. Yeah. And what I would add to that is even if you are talking to one of the client services team, know that the day does not end without me knowing exactly what happened on that call or in that email. Yeah. So even if you're not hearing directly from me, I, I do know what's going on with every one of our RIA firms and their clients. Yep. Okay. You heard it first right here, Ignite Funding, the investment advisor program. If you have any questions about it, please reach out to Misty Bethany at Ignite Funding. That's mbethany at ignitefunding.com. And she can answer any questions that you might have. We'll see you next time on Deeds in the Desert. Thanks for joining us this week on Deeds in the Desert, where short term investments meet long term investors. We hope you enjoyed the content so much that you share it with all your friends who doesn't like learning about passive fixed income, right? Still hungry for more education, visit our website at ignitefunding.com. Or if you're ready to take the leap and start investing, give us a call at 702-761-0000 and schedule a free investor consultation.