Investment management software with integrated distributions. Why is it a necessity?

Hopefully, you have an effective solution to help you handle most aspects of your investment management, together with an Investor Portal and advanced investor CRM.

But there is one area of operational efficiency where most commercial real estate GPs and syndicators still need to catch up – distribution payments.

For those of you still using the bank’s generic platforms (or other payment services) to send distributions, there are clear advantages to having an investor relationship management software that enables you to make distribution payments from within the platform.‍

Let’s review the main advantages of integrated ACH transfers for distribution payments.

Convenience of use

A payment solution that resides on your investment management platform is convenient to access and use.

You can access the payments feature as you access other features (like the investor CRM or investor reporting tools) from within the same dashboard just by clicking the tab.

There’s no need to go back and forth to external bank portals or websites and no need for repeated log-ins just to view information. Everything is conveniently located and reachable under one roof.

With the same seamless flow, you can get into an entity, set up a distribution payment, get an overview of the status of all your payments, and then generate and send a distribution notice to your investors.

Designed specifically for distributions

Contrary to other payment solutions that are just a generic platform for ACH transfers, a dedicated distribution feature is designed specifically for real estate distribution payments:

• The payments dashboard includes relevant data like investor info, positions, and the status of pending distributions.
• You can generate pro-rata calculations or import spreadsheets for waterfalls and automatically create the distributions based on those calculations.
• You can get a live status overview of your distributions for each entity to know which payments are settled and which ones still need your attention.

Data integrity

One of the most significant advantages of using an investment management platform is concentrating all your investor-related activities in one place, which can be depended on as a single source of truth. ‍

Any data of activity that takes place outside the platform needs to be imported into the platform to keep it up-to-date. It’s time-consuming, counter-productive, and error-prone.

On the contrary, payments from within the platform are automatically updated across the board – investor info, entity info, etc., with no additional actions needed. The integrity of your data remains at its highest level.

The same security level as bank transfers

Your investment management software should provide the same advanced security protocols as any bank.

2-factor authentication, encryption, and ISO/IEC 27001 compatibility are must-haves for your investment management platform and its payments feature.

Check if your platform provides the necessary security features. If it does – this means you get the same level of protection as with any bank, with all the added advantages that banks can’t offer.

Automatic authentication of investor accounts and payment instructions

A significant pain point with managing payments to multiple investors is the need to enter their payment details manually.

By integrating with authentication services like Plaid, your investment management software can automatically retrieve account and routing numbers when the investors connect their bank accounts using bank credentials.

The automatic verification feature is not only a matter of convenience.

The feature also prevents errors that can occur with manual data entry and keeps the information up-to-date automatically if anything changes on the investor’s end.

Support of international payments

Transferring money domestically is pretty straightforward. You can set up an ACH transfer for a fairly low fee, and your investor will get the money within a couple of days.‍

But what happens when you have investors abroad? Here’s when things get tricky.

The technical part – the actual wire transfer, is not the real challenge. International payments pose severe challenges with a lack of standardization in international regulations, currency conversions, and payment security.

When you need to periodically send distributions to investors abroad, handling it yourself takes too much of your time, and missteps can cost you dearly. On the other hand, outsourcing it to your accountant or hiring internal staff is too costly.

The solution? Ask your investment management solution provider if they have a financial administration service with dedicated financial experts that can assist you in handling international payments.

Farewell to NACHA files

Any time you convert data from one format to another, you add another step to the process, thereby increasing the risk of errors and data corruption. Using a NACHA file for distributions is precisely that – creating a data file with the sole purpose of migrating it to another system, just to be converted once again to payment instructions.

‍When you handle your distributions end-to-end, you can finally say farewell to the inefficient practice of creating and exporting NACHA files.

Faster, simpler-to-generate reports and distribution notices

Since the distribution information is already inside the system, creating investor reports and distribution notices is easy and can be done as part of the same workflow. ‍The data is automatically retrieved to generate the reports. This way, you can manage the entire distribution cycle from beginning to end directly from within the software with just a couple of clicks.

Not all real estate investment management solutions have built-in distribution payments

Using a management solution that doesn’t enable you to handle distribution payments end-to-end from within the platform? That means you’re not optimizing your investment management operations. It may be time to scour the market for a more comprehensive solution better suited to your needs.

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Author

Shepsi Berkowitz

Shepsi is Agora’s Head of the Financial Products department, leading the Agora Payments, tax, and financial services globally. As a former CEO and co-founder of a tech company, Shepsi has extensive experience building various complex products and services from inception to market.

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