Financial advisors can provide a valuable service. Meeting long term financial goals, realizing tax efficiencies, tailoring your portfolio to your level of acceptable risk — I totally get why so many people consider their financial advisor a trusted confidant.

That said, financial advisors have limitations. As this article points out, not all financial advisors are created equal or often serve the best interest of their clients. As this article shows, 80% of fund managers underperformed the S&P 500 over the past five years. And now there are so-called robo-advisers that can provide these services at much less cost and time.

People often ask me how often we get investor referrals from financial advisors. My answer remains unchanged over the years…we NEVER get referrals from those folks. I get holiday cards and newsletters from a lot of them, but certainly not people who might be interested in our deals.

Why is this the case? Well, the primary reasons come down to incentive, leverage and platform. Financial advisors have very little to no obvious incentive to refer private company opportunities to their clients. They look at it as funds under their management going out the door, which results in lower management fees for the advisors. 

Perceived loss of leverage is another issue. Most financial advisors want to “own” their clients, which makes it difficult for them to “share” a client with someone else offering them an investment product, even if it is something non-competitive, like a private company investment.

The reason I hear the most, though, as a reason that financial advisors do not refer private company investment to clients, is that these opportunities are not on their investment platform. What does this mean? Basically, financial advisors typically utilize or have access to an investment platform that acts as a menu of opportunities for clients. There is rarely a private company section on that menu.

So, if you want access to private company investment opportunities, I would strongly contend and recommend that you look beyond your financial advisor. This is an asset class that you should have some — not a lot, but some — exposure to. Our team at Tidewater Investment Company is happy to educate anyone interested about these opportunities and why they are worth considering. Give us a shout or drop us a line. We are happy to talk or meet anytime, anywhere.

About Merrette Moore: Merrette Moore is the Managing Partner of Tidewater Investment Company, overseeing the operations of the firm. Merrette has over 25 years experience working in finance, company management and innovation. He has been involved in over 50 private investments, serving as the lead investment representative for many of these deals. Merrette has participated on the boards of several privately held companies either as the executive chairman, director or an observer.
 
 
About Tidewater Investment Company: Tidewater Investment Co. is a North Carolina investment firm focusing on small company direct investment as well as healthcare venture capital. Tidewater provides unique access to subordinated debt, small company private equity, growth capital, and venture capital investments for high net worth individuals, family offices, and small institutional investors. The firm’s investment platform allows investors the flexibility to invest on a deal-by-deal basis without any upfront commitment of long-term obligation.