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Benefits to Immigration Attorneys
An immigration attorney can enter into an alliance with an
investment adviser to provide combined legal and investment
advisory services to their clients, subject to the limitations
of professional regulation. Through the collaboration, such
a team provides independent, professional, and consolidated
services that neither could provide alone. Clients enjoy a
strong sense of security because of the enhanced service.
Through the alliance, immigration attorney and investment
adviser can both achieve higher conversion rates, while they
help their clients to make a more informed decision.
In many foreign countries, an EB-5 investor often expects a
“super” immigration attorney to know everything about EB-5,
including technical issues such as the possibility of project
completion, project evaluation and etc. With the alliance in
place, an immigration attorney no longer faces the pressure to
practice beyond the limits of professional expertise.
Benefits to EB-5 Industry
The much anticipated permanent reauthorization of the
Regional Center Program did not happen last year. A major
concern is fraud, as evidenced by recent lawsuits filed by the
SEC. If RIAs had represented the investors in these cases, they
would have checked the issues “under the hood;” the fraud
would have been avoided. Consequently, there would have
been less criticism and the program might have a better chance
of becoming permanent.
To investors, the RIA model can give them a sense of
security and a desirable situation that everybody is looking for:
happier customers, fewer complaints, better social image, and
more stability throughout the EB-5 industry.
The RIA model may also boost investor confidence by
making the process more transparent and efficient. Investors
would spend less time making the investment decision, which
could in turn reduce friction and marketing costs.
To Regional Centers who are promoting safer deals, the
RIA model could potentially starve out the riskier competitors
and help bring supply and demand back into balance. Hence,
lower finder fees become possible.3
Challenges and Opportunities to RIA Model
As good as it may sound; the RIA model is yet to be tested.
The investors are not accustomed to commit to a relationship
with someone whom he or she just met a few days ago.
However, it appears that more and more investors are becoming both more risk averse and more investment savvy, and
they are starting to look for independent advice. Given the
likelihood of an increased minimum investment amount, the
benefits of safety and convenience seem to well-compensate
the inflexibility created by an advisory fee agreement.
★
Contradictory to common belief that an investment adviser should not step into immigration risk evaluation
territory, the idea that an RIA can more effectively mitigate immigration risks is stron g. The reasons are
following: 1) An RIA who understands real estate development process can evaluate the readiness of a project
from the perspectives of entitlement, site control, financing, construction contract, and market feasibility. If
a project cannot complete, job creation cannot complete either. 2) An RIA typically has a stronger economics
and investment knowledge base, which can be more helpful to evaluate the assumptions, methodologies, and
conclusions of an economic study report. 3) An RIA has more knowledge in projecting revenue generation which
directly impacts operational job creation. 4) An RIA usually has more experience in the business world, and he or
she can quickly grasp the concept of sustained investment or at-risk requirement. As such, an RIA can be a great
support to immigration attorneys who have much more comprehensive knowledge and experience in immigration
laws and who receive direct feedbacks from USCIS.
1
As explained in prior section, to formally begin advising an investor, a RIA would sign a fee agreement with
the client which specifies the amount of fees and scope of services. Before a fee agreement is signed, an RIA can
answer general questions about EB-5 such as retrogression, but does not give investment advice about a specific
project. The fees come from the investors only and it is predetrmined.
2
My observation is that in China, EB-5 is mainly a “relationship market”, not a “due-diligence market”, i.e. many
investors make decisions based on trust to their friends and relatives who are associated with intermediaries,
attorneys, or regional centers, not based on advice given by investment professionals. Because of the complexity
and lengthy investment period, the friends and relatives could be giving out sincere but “bad” advice. Because
the market lacks to some extent ability to evaluate investment, a “good” EB-5 project may have a hard time to
differentiate itself from competitors that are indeed more risky. In many cases, the “good” EB-5 deal is forced to
offer higher finder’s fee to motivate migration agencies who in turn mobilize more “amateur advisers” - friends and
relatives of potential investors. The adoption of RIA model can help differentiate “good” deals from the crowd.
The market would identify the “good” deal, either through an RIA, or through RIA’s clients who leak out the
“insider information”. The more RIAs in the system, the faster the “differentiating” process will complete.
3
Eric Yao is the founder of Pacific ProPartners,
a California Registered Investment Adviser
specializing in EB-5. With over 20-years of
professional experience and having worked
at a real estate development firm, a regional
center and an immigration agency, Eric has
a thorough understanding of the entire EB-5
process. Eric earned his MBA in Real Estate from
the University of Wisconsin Madison, an MA in
Economics from Renmin University of China,
and an MS in Real Estate from the University of
Reading.
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EB5 INVESTORS MAGAZINE