I’m not going to rehash my thoughts on non-traded REITs here because I’ve already beaten that dead horse back to life and then into death again. Several times. Suffice it to say, I’ve been calling them poisonous for almost a decade at this point.
One of the largest purveyors of non-traded REITs (and the salespeople who sell them) has just filed for bankruptcy protection. I watched as this firm began rolling up small broker-dealers, some of which I knew to be notorious boiler rooms from my prior career in the retail brokerage wild west. Once that began, I guessed it wouldn’t be long before the whole thing would blow up. If you’re going to sell a subpar product with an obscenely high commission, you’re going to need some serious mercenaries on your salesforce. And with salespeople like that, trouble can’t be far behind.
And that’s exactly what has happened.
One of the strangest twists in this story is that many of the firm’s decent advisors and brokers also got caught up in the storm. When the firm went down, some of its employees were among the shareholders holding the bag.
“If you’re asking me as a stockholder, I feel lied to, used and taken advantage of,” said the Cetera adviser, who bought RCAP shares under the stock warrant program. “I’m taking my life’s work and starting over again,” said the adviser, who asked not to be identified but said that he had invested a six-figure amount in RCAP shares.
I would tell you to read Bruce Kelly’s profile of this brokerage firm’s aftermath at Investment News right now to understand what’s happened.