As a leading managing broker-dealer in the alternative investment space, WealthForge is often asked by prospective sponsor clients if our dealer-manger services include wholesale or retail distribution of a client’s offering. The short answer is no, but for good reason: Sponsors that outsource fundraising sacrifice their ability to own and control the messaging around their project. An in-house sales team will also be more effective at evaluating and fine-tuning the effort that goes into raising the capital needed to meet crucial business goals.
We are often approached by principals at firms who raise money on their own, through a friends-and-family network, and assume investors will come running when their offering is made available on the WealthForge platform. That just doesn't work without a distribution team, or group of wholesalers, that know how to market a project to the network of advisors and independent broker-dealers that raise capital through their investor clients. Reps and advisors also tend to be sour on asset managers that raise their own capital, which can forestall building the important relationships sponsors need for their project to succeed. An in-house sales team has first-hand knowledge of the sponsor's ability to deliver a successful outcome.
Some managing broker-dealers do have distribution teams that will take on different projects for different clients, but that not only limits the sponsor’s control over the messaging, it also dilutes the level of attention a project gets from a sales team as well. A sales team tasked with gathering selling agreements for multiple sponsors and various asset classes is necessarily less focused on representing just one sponsor’s product.
If you’re going to spend the capital required to get a successful real estate or other alternative investment project off the ground, it’s best to put in place as many of the pieces as you can, and a distribution team is a key component of any project.
WealthForge sometimes advises firms on how to build a sales team and we thought we’d share some of that advice here.
Building the Team
Because the cost of entry into the alternative investment distribution space is truly a barrier beyond managing the underlying asset itself, we encourage sponsors to hire only two or three sales professionals at first as they’ll need to be paid a salary in addition to a success fee for capital raised (basis points on closed investments) while they get up and running. It’s best to have a distribution team that’s built on the momentum and reputation of the sponsor.
The distribution effort will typically be led by a national sales manager who manages a small team of wholesalers. A team of wholesalers typically includes external sales professionals who meet face-to-face with potential distribution partners in an assigned territory. A distribution team should also have an internal wholesaler who sets up meetings for external staff in an operational manner.
MBD Behind the Scenes
Once you have a distribution team in place, a managing broker-dealer like WealthForge provides extra layers of assistance to ensure your sales team’s efficiency. Additionally, an independent broker-dealer is truly independent of the sponsor. The managing broker-dealer’s role is to ensure the distribution effort stays on task and that the syndicate members have what they need to provide the sponsor’s targeted investors with all that they need to properly represent the offering and efficiently complete the investment. That assistance, along with standard back-office compliance, can include:
- Holding wholesalers’ licenses, including all that goes with regulatory supervision
- Reviewing marketing materials
- Processing subscription packages
- Integrating with transfer agents
- Monitoring email communications
- Providing continuing education
WealthForge, as part of our syndicate administration service package, distributes selling agreements to broker-dealers and RIAs for execution, keeps track of them behind the scenes, timely pays commissions to syndicate members for their success, and makes the necessary regulatory filings for sales that have closed.
Learn more about the benefits of outsourcing broker-dealer services and how working with WealthForge can save you time and money.