Financial Advisors: Talk to Your Clients About LODAS

When I was a financial advisor, the first quarter was dedicated to meeting with clients to review their accounts and plan for the year. While I talked with clients regularly on the phone and by email, I set aside time early in the year to sit down and have candid conversations about market conditions, life changes, assets clients wanted to keep or let go and any changes to their financial goals. 

I’m no longer an advisor but I’m still in the industry and have a pretty good guess on how the 2022 reviews are going. To say that last year was “volatile,” is putting it mildly. With the market’s ups and downs, inflation climbing, housing market swings, layoff announcements, and recession headlines, my gut says clients are attending their reviews feeling extra cautious and maybe even shell-shocked. 

In a turbulent economic environment, there’s the potential for more investors to want a path to liquidity. 

Then: liquidity lockout

You may have clients who bought real estate investment trusts (REITs), business development corporations (BDCs) or other alternative investments that they planned to liquidate in five to seven years. But if those investments haven’t had a liquidity event, your clients could be in those funds longer than they planned. Years later, they may still be unable to secure the liquidity they want and be stuck in a fund that’s no longer a good fit for their portfolio or long-term financial goals.

No one likes to feel locked out. Especially from their own money.

In the past, there were two main solutions you could offer clients in this situation. First, you could encourage them to wait – longer – until they could recoup their investment through a fund’s redemption program. As recent headlines show, though, redemptions aren’t always a sure thing. 

Or, you may have advised them to consider a third-party tender offer for their shares. But mini-tenders aren’t ideal either. Typically, a third-party offer will be heavily discounted from the original investment. 

Fortunately, today there’s a third option you can present to clients when they ask, how can I exit this fund?

Now: liquidity on demand

The LODAS marketplace operates similarly to an exchange. Alternative and real estate investments, including non-traded REITs, BDCs and private real estate investments, can be traded similar company stocks. The paperless trades can potentially be executed in a day, and settled as quickly as five days, which is significantly faster than the multi-week process that’s been the standard until now.

In the marketplace, your clients can buy when they want to buy and sell when they want to sell. There’s no waiting on a fund redemption program or a low-ball tender offer. Your client decides if they want to sell their shares and when. 

In short, it’s liquidity on demand.

If you’re like me, you became a financial advisor to help people achieve their goals. But the volatility of 2022 may have your clients wondering if they can still achieve their targets and looking for the security that liquidity can provide.

No one wants to have to tell a client that their money is locked up and that their choices are limited. During this year’s reviews, talk with your clients about LODAS and how the marketplace can provide them with options for liquidity – on their terms.