Fiduciary and Regulatory Framework Innovations Shaping the Future of the Secondaries Market
According to EY’s 2021 Global Wealth Research Report, over a third of investors globally currently hold alternative assets, and that number is expected to increase in the coming years. With trillions of dollars of assets under management, the rise of the alternative asset investment market has been impressive, but there is a problem: investors own a high-value alternative asset but accessing that value when it’s needed most can be a major challenge. Ben was founded to solve this issue, and we did so by creating a new market—one where these investors can access liquidity in a simple, rapid, and cost-effective way. Derek Fletcher, Ben’s President and Chief Fiduciary Officer, has played a critical role in establishing a fiduciary framework for this market, empowering investors with the confidence and security to take back control of their alternative investments. By prioritizing security and sound fiduciary policy, Derek helps us safely provide access for our customers to a benefit traditionally held only by large financial institutions.
Derek recently discussed how his team has established a framework that is underpinned by rigorous regulatory principles, but still flexible enough to bring new, innovative solutions to market for Ben’s customers. With over 25 years of experience in estate planning, wealth structuring, and fiduciary advisory services, Derek continues to couple his deep understanding of what our customers need with the fiduciary and regulatory discipline needed to maintain their trust and confidence. Derek explains his perspective on what Ben has achieved thus far and vision for what’s next below.
Ben’s Customer-First Approach
When I joined Ben three years ago, it was clear how foundational trust and collaboration were to the firm. I knew that commitment would be vital to successfully create a new, much needed market for owners of alternative asset investments. The concept of building a new offering from the ground up attracted me to Ben, but it was the customer-first and solutions-oriented approach that excited me the most.
Our team works with a range of customers facing unique constraints on their alternative asset investments, making it critical for us to think beyond the existing set of options in the market. It is equally important that we apply rigorous fiduciary principles to new approaches to strive to protect our customers and their assets. To strike this balance, we constantly push one another to think bigger, to work through barriers that can seem impossible to break through, and to share insights so we can apply our collective expertise while we challenge the status quo—this culture of innovation is how we find new solutions for our customers.
Using Fiduciary Principles to Inform Innovation
Bringing our solutions to customers often requires that we go beyond a traditional market approach. An exciting example of this is the work we’ve done with regulators and lawmakers in Kansas to establish the Technology Enabled Fiduciary Financial Institutions (TEFFI) Act. This legislation is a gamechanger for our industry as it provides the first unifying regulatory framework for general partners, sponsors, and other key players to better serve owners and managers of alternative asset investments. At its core, the TEFFI Act adopts a traditional financial institution framework, updates it by bringing fragmented processes together, and applies it to the alternative asset space. The Act provides investors with the confidence of interacting with a regulated entity that is subject to safety, soundness, and stability principles, while creating greater efficiencies for owners of alternative assets seeking liquidity, custodial, and administrative services for their investments.
TEFFI forms a unified business, regulatory, and tax-friendly operating environment and provides a major step in efforts to modernize the delivery of financial services to alternative asset investors—both of which will be attractive to the entire industry. As the TEFFI pilot organization, we continue to work with Kansas regulators, legislators, and industry participants to develop the specific processes and framework for this legislation ahead of wider adoption.
Anticipating Market Needs & New Trends for Alternatives
I see our ability to provide for this universe of investors expanding rapidly as more individuals, wealth managers, and family offices are introduced to Ben’s services. A specific area where Ben can provide more support is within investor groups that own alternative assets through qualified benefit plans. With the Labor Department approving the inclusion of private equity investments in 401Ks, more of these investors will look to exit these alternative asset investments to diversify their portfolios or satisfy other needs. This trend is further exaggerated by the transfer of generational wealth seen across investment portfolios. We believe this growing market will drive the market expansion and result in a need for access to more efficient liquidity, custody, and administrative options.
As the market grows, the need for increased financial literacy related to alternative assets is increasing. Ben is focused on not only educating investors and their advisors, but equipping them with the information, resources, and technology needed to manage their alternative asset investments. These educational efforts will only continue to grow in importance as the market becomes increasingly complex. At the same time, we’ll need to continue our efforts to apply fiduciary principles in innovative ways for the benefit of our customers, their advisors, and the market at large.
Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Speak to your financial and/or tax professional prior to investing. Securities are offered through Emerson Equity LLC, member FINRA and SIPC on a best-efforts basis as managing broker-dealer. Emerson Equity LLC is not affiliated with any other entity identified in this communication.