Financial Matters

Due Diligence for Investments

At Schultz Financial Group (SFG), we view wealth differently through our Four Capital approach. Our team works with you to build your wealth across Four Capitals – Financial Matters, Physical Well-being, Intellectual Engagement, and Psychological Space. This post focuses on what due diligence is, how SFG engages in this process, and why it’s important. 

What is due diligence? 

Due diligence is the investigation of an underlying investment opportunity. It seeks to provide answers to the question “What are the potential risks of this investment?” so an investor can make a well-informed decision prior to investing capital in the opportunity.

What is SFG’s process? 

Our process can be broken down into three main parts: 

  1. Investment Due Diligence focuses on understanding the ins and outs of the investment strategy, the investment manager, and the terms to which an investor would be agreeing to, among others. We conduct a quantitative analysis to determine the feasibility of the investment strategy, the risk vs. return profile, the portfolio’s volatility, market sector outlook, and the manager’s track record of achieving an investment’s target return through various market cycles, to name a few.
  2. Operational Due Diligence focuses on the risks associated with the execution of organizational functions. It analyzes the structure of both the investment manager and investment fund entities. Specifically, we conduct a qualitative analysis to assess the risks associated with the investment manager’s policies and procedures (e.g., cash management policy, valuation policy, business continuity plan…etc.) and insurance policies (e.g., E&O, D&O, Cybersecurity…etc.), key person background checks, investment manager style drift, litigation involving the investment or investment manager, third-party providers and counterparties, trade reconciliations and financial statements, in-person or video conference meetings with investment managers, and the investment’s terms and documentation, among others. We also conduct on-site visits, when possible.
  3. Once invested, it is important to conduct Ongoing Due Diligence. While Investment Due Diligence and Operational Due Diligence take into account information available prior to investing, Ongoing Due Diligence takes into account information received after an investment has been made. This allows us to potentially identify  new risks that may arise or any changes to risks identified after conducting Investment Due Diligence and Operational Due Diligence. 
Why is due diligence important? 

Due diligence helps us identify risks associated with an investment prior to our clients allocating capital. This is especially important in the context of alternative investments (e.g., private real estate, private debt/credit, private natural resources, private equity, and hedge funds), because, once invested, an investor’s capital may be illiquid for a period of five to seven years, sometimes longer. Once the risks associated with a particular investment opportunity are identified, we can determine a client’s suitability for the investment opportunity based on their risk tolerance and portfolio objectives and constraints. Then, we provide the client with information they need to make a well-informed decision.

At SFG, we understand the risks facing today’s investors and take our role as a fiduciary very seriously. We believe transparency is the key to building trust between us and the client.

Tony Miller is an Associate Wealth Manager with Schultz Financial Group Inc.

Schultz Financial Group Inc. (SFG) is a wealth management firm located in Reno, NV. Our approach to wealth management is different from many other wealth managers, financial advisors, and financial planners. Our team of fee-only fiduciaries strives to help our clients build their wealth across four capitals: Financial Matters, Physical Well-being, Psychological Space, and Intellectual Engagement. We provide family office and wealth management services to clients located in Nevada, California, and other states. If you’d like more information, please check out our website or reach out to us via our contact page.

  • Important Disclosure Information: The information contained within this blog is for informational purposes only and is not intended to provide specific advice or recommendations.  If third party products or services are referenced in the above blog post, then Schultz Financial Group is providing that information for informational purposes only and is not recommending or endorsing any third party products or services. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Schultz Financial Group Incorporated), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Schultz Financial Group Incorporated. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Schultz Financial Group Incorporated is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Schultz Financial Group Incorporated’s current written disclosure statement discussing our advisory services and fees is available for review upon request. Please Note: Schultz Financial Group Incorporated does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Schultz Financial Group Incorporated’s web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.