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How Advisors Can Help Clients With Crowdfunding Due Diligence

February 12, 2018

More and more investors and financial advisors are able to get in on early stage companies and initial public offerings thanks to equity crowdfunding, Steven Morris writes on WealthManagement.com. And while many investors treat equity crowdfunding as a decision they make with their heart, advisors can steer them to make sure it’s made smartly as well, he writes.

Fortunately, there’s been a “successful alignment” in equity crowdfunding between considerations of financial fundamentals and positive social impact, according to Morris, founding partner and CEO of biotech firm BIOLIFE4D. But advisors should still help investors make the right choice by doing due diligence through comprehensive review of all filings and disclosures, he writes.

Advisors also need to study the markets targeted by the companies in these equity crowdfunding deals to ensure commercial viability, according to Morris. It’s also important to assess the company’s leadership, because equity crowdfunding “does attract a genre of people who are looking to make fast money,” he writes.

Finally, investors should realize that these companies will consider them not only as investors but also as partners and brand ambassadors, and may expect them to help spread the word to their family and friends, according to Morris.

By Alex Padalka
  • To read the Wealth Management article cited in this story, click here.