Thought Leaders in Financial Technology: Diversyfund CEO Craig Cecilio (Part 3)

Sramana Mitra: As they’re getting educated, are they also getting investment recommendations that they can go and click on and sign up for?

Craig Cecilio: No investment advice. It’s a compliance thing. We can’t give investment advice. That’s another challenge. What can we say and what can’t we say from a compliance point of view? There has been a lot of oversight in the last year or two. As we move from this great bull run over the last 10-plus years to this bear market, the pendulum swings in oversight.

We’re always talking to our third-party consultants and our attorneys about what we can and cannot say. There is a lack of advice for people because it’s hard to give people advice online right now.

Sramana Mitra: Based on the data and facts that you provide, are there natural places that you lead them to trigger an investment decision?

Craig Cecilio: We don’t lead anyone. We just present the facts and give them as much data as required. We give them some financial data too. Some people need basic financial education tools.

Sramana Mitra: Your business model is based on assets under management? You do not charge for the education.

Craig Cecilio: We don’t. If we do really well on our assets, we share in those profits with our community. We have a lot of different structure setups. The more people that are engaged, the more assets we buy, and the more we benefit.

Sramana Mitra: Explain how multi-family home investing works.

Craig Cecilio: That’s a great question. We’re focused on institutional quality investments. You’re getting debt from a bank, which is the cheapest debt possible. You’re buying assets for $20 million plus. You can’t just go and start this from scratch. You need a pretty big track record. There are hoops you need to jump through to get to that asset class.

For the sake of this conversation, we have all this experience. We know how to acquire the assets. We also have partners that give us good financing to put the deals together. We find the assets. In some cases, it’s a distressed asset. We go in and buy it under the market and we clean it up. We go in and start collecting the cash flow.

Over time, we choose the best point in the future to sell that property. We just came out of a great time period to sell property. For the last six months, things have been going downhill. Now if you’re buying, you’re going to hold on a little longer till you catch that tailwind of when the market is getting up.

Sramana Mitra: The investors are making money when you sell the property.

Craig Cecilio: Yes, they do.

Sramana Mitra: I’d like to ask you a few questions on broad industry trends. Yesterday, I was talking to the CEO of DealMaker. It’s an equity crowdfunding platform. We were having this conversation about rank-and-file investors. They don’t need to be accredited investors, but they can still invest.

We had a conversation about what it means to have democratized opportunity for people to invest. The story I told her was our gardener invested in a startup. This guy doesn’t have any idea what he’s doing. He invested in his friend’s startup. He basically lost all his savings. What is your point of view about the Jobs Act?

Craig Cecilio: The intent to democratize it is there. I believe we all should have the opportunity to invest. I always think why can’t we regulate through education? A VC goes, “I might make one out of twenty.”

If you’re an average person and you don’t know that, you have to understand that it’s high risk. You have to go in and make sure that it’s not more than 5% of your net worth. We need to educate people to not overdo it. It’s only 5% of your net worth in a 12-month period. That’s your whole limit.

This segment is part 3 in the series : Thought Leaders in Financial Technology: Diversyfund CEO Craig Cecilio
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