At least three registered investment advisors managed by Advisor Group disclosed new potential conflicts of interest late last month. This stems from various financial services pots in which the company’s owner and private equity manager, Reverence Capital Partners, is involved.
In 2019, Reverence Capital agreed to acquire Advisor Group. Advisor Group is a leading network of independent broker-dealers with over 10,000 financial advisors currently working under various roofs. Advisor Group now aims to restructure its brand and services in the coming months to present a more unified front.
That was the first pot. The second was last year when Reverence Capital invested his $100 million in CAIS. CAIS has facilitated over $15 billion in transactions on a platform that connects alternative asset managers and financial advisors. According to CAIS, the $100 million from Reverence Capital represents about 10% of the company’s value at the time.
Reverence Capital’s investment in CAIS created a conflict of interest disclosed in Form ADV updated by the three advisory groups RIA at the end of March. Arbor Point Advisors has $6.4 billion in assets. Triad hybrid solutions are $4.6 billion.
Agreements between Advisory Groups and CAIS on the sale of alternative investments, and the income generated by such sales, are at the heart of the matter. Also, Advisor Group could have opted for his CAIS platform before Reverence Capital made its investment to mitigate the appearance of a conflict of interest.
The RIA and CAIS transaction “provides a payout of up to 10 basis points on the value of the sale of alternative investment products sold through the CAIS platform,” according to the wording in each of the three companies’ updated disclosures. Therefore, the company has an incentive to recommend alternative investments in the CAIS platform, which is a conflict of interest.However, your advisors will not receive any portion of this compensation.”
A basis point is a hundredth of a percentage point. 10 basis points of $100,000 is $100.
Advisor Group President of Products and Platforms Matt Schlueter said in an email: “For these reasons, he offers CAIS among the many additional alternative investment solutions he makes available to advisors. Our annual disclosure has been updated to reflect this new offering. ”