Traditional bank escrow agents cringe at this new era of “crowd-direct” offerings. Their business models, catering to offerings with perhaps just a handful of investors, never required them to develop much technology. With direct-to-crowd offerings, the complications (and risks) are exponentially higher. For instance, we had a Reg A expire without meeting its minimum, resulting in refunds going to all investors…11,542 of them. We had a real estate developer want to send partial refunds to 97 investors, requiring new subscription agreements from each one before escrow could close. We’ve seen thousands of ACH failures and exceptions. And these examples only skim the surface. Translation: it’s complicated, it takes a lot of work, it takes an appetite for associated risk, and it takes a lot of technology to be an escrow agent for this industry.
We realize that we aren’t the cheapest. Which is because of the amount of work we do and tools we provide vs low-tech escrow banks. But, regardless, both FundAmerica and Prime Trust are lowering fees effective immediately. The primary changes are:
- Cash Mgmt & Reconciliations (Prime Trust) – 25bps, now capped at $4,000 (except for continuous, open-ended fund offerings)
- System API License (FundAmerica) – was $7.50 per transaction, now $0.00 (yes, free)
- Invest Now button plug ‘n play transaction engine (FundAmerica) – was $45/transaction, now $0.00 (yes, free)
This is on top of other recent fee reductions or options, such as making AML optional instead of mandatory, and accepting Bad Actor checks from law firms employed by the broker or portal as part of their due diligence. And its on top of other things that we’ve already eliminated costs on, such as our Reg A Test-The-Waters plug ‘n play technology (which is free).
You can see the new fee schedule on the Prime Trust website.
We will continue to make raising money online as friction free and as cost-conscious as possible.