Thursday, December 3, 2009

Broker Dealers

Raising capital from Broker Dealers is time consuming and expensive but can be a fruitful endeavor.

Broker Dealer firms are essentially licensed by FINRA that regulates the firms who employee the registered representatives who will present investment offerings to their clients.

Any offering that is legally registered with the SEC can be presented to clients of broker dealer representatives. However, broker dealers have in-house or 3rd party due-diligence firms who approve investment offernings before they are presented to clients (investors) of the registered representatives of the broker dealer firm.

Merril Lynch, Charles Schwab, and thousands of small broker dealers you may never have heard of are all essentially the same thing. A firm who has complied with the SEC to offer investments approved for sale such as stocks, bonds, mutual funds, and alternative investments such as Forex, Real Estate equities, Real estate debt, Oil & Gas, etc.

The big difference between raising capital through broker dealers and essentially every other avenue is that broker dealers require up front fees or commissions to refer their clients to buy into your investment. At the present time, gross fees range from 6-10% of capital raised.

Wow! Does that sound expensive? Well, it does if you your offering is designed to offer an internal rate of return (IRR) below a 15-20% or more thresh hold. Many investors have no idea that when they invest with their trusted broker dealer rep, the company very well may have made for more than he did.

However, if you have short term offerings where you can make in excess of 20% annually and at the present time not very difficult to attain especially in the distressed real estate asset, real estate debt, and corporate debt markets, it might make sense to pay those fees.

Ok, so how do you get a broker dealer on board?

1) First of all your offering needs to be investment ready both legally and from a marketing perspective. I've posted recently about how to do that so refer to my September 09 article entitled " "
2) Find a local broker dealer association nearby to your investment offering if it is localized. If its and international investment, then choose the market you feel most interested in what you have to offer.
3) Have your offering underwritten either by the internal due diligence team of the Broker Dealer firm or by their 3rd party team. A great example of a 3rd party team is the Alliance of Independent Broker Dealers focusing on the San Francisco Bay Area.
4) After your offering has been approved, its up to you to attend the broker dealer's conferences and functions. You also will have access to the broker dealer representatives email address' and phone numbers. If you are good at selling and have a good investment that has a track record and a future, you will begin to receive investment inquiries.

This is obviously a very brief description of the process. If you are interested in knowing more, do not hesitate to call or email me.

To your wealth!

Russell Roesner
415 680 3454

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