On December 8, 2020, The SEC’s expansion of Accredited Investor’s definition became effective, expanding individuals that are ‘accredited.’ The definition includes several new categories of accredited investors, making 2021 the year that RIAs can grow their business by offering private placements in portfolios. Notable changes to defining accredited investors include:

  • Individuals who have obtained certain professional certifications and designations, such as the General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82) and the Investment Adviser Representative license (Series 65), or other credentials issued by an accredited educational institution;
  • With respect to investments in a private fund, a new category based on the person’s status as a “knowledgeable employee” of the fund;
  • “Family offices” with at least US$5 million in assets under management and their “family clients,” as each term is defined under the U.S. Investment Advisers Act of 1940, as amended (Investment Advisers Act);
  • A new “catch-all” category for any legal entity, including governmental entities, owning “investments,” as defined in Rule 2a51-1(b) under the Investment Company Act, in excess of US$5 million and that was not formed for the specific purpose of investing in the securities offered; and
  • Registered investment advisers exempt from registration under the U.S. Investment Advisers Act, rural business investment companies, and limited liability companies and other entities that meet certain conditions.

Source: Mondaq. December 7, 2020.

The new expanded definition will be a game-changer for RIAs with clients who have more than $1 million in net worth (excluding their residence) or have earned more than $200,000 per year ($300,000 combined with a spouse) in each of the last two years. 

Offering private placements requires trading and rebalancing software that automatically displays performance data so RIAs can select winning investments. AdvisorPeak streamlines this process, keeping service provider data fully transparent. With AdvisorPeak’s API integration with alternative investment service providers, common challenges RIAs face eliminate: 

Investment Minimums- Often, private placements require $10M to participate and must prove $25M in AUM. An RIA can reduce the minimum required with collective buying through the private placement service provider.

SEC Compliance/Due Diligence– RIAs have access to comprehensive research provided by the service provider to help them make investment decisions and satisfy documentation and due diligence requirements during an audit.

Cost-Efficient Trading- Buying alternative investments is different than buying ETFs and requires software that efficiently processes, buys and sells, and distributes gains and keeps the cost low to the investor.

Find out how AdvisorPeak provides RIAs with the industry’s best trading and rebalancing software for private placements.