Smart businesses are always attentive to the security of their funds, and this is especially true when finances get tight. At Accruit we field a lot of questions about our financial security policies and processes, which is as it should be. We work with some of the best companies in the country and have roughly $8 billion in assets under management at any given time, so we expect and welcome these questions.

If you’re a business thinking about conducting a 1031 exchange or implementing a full like-kind exchange (LKE) program, here are some things to think about.

• When selecting a Qualified Intermediary (QI), be knowledgeable of the types of investments that the QI will invest in. The QI should invest in funds whose primary investment objectives are liquidity and preservation of principal. As an exchanger, you want to make sure that the funds will be available when you need them.
• Don’t be persuaded by promises of higher returns because with higher returns comes more risk. Remember, the main benefit of a 1031 exchange transaction is tax deferral. QIs should exercise reasonable care, skill and caution when selecting investments and the client should insist that they do so.
• Additionally, exchange funds should never be commingled with the operating accounts of the QI.

Many states, including California, Idaho, Nevada, Washington and Colorado, have enacted laws to regulating the QI industry. Many of these laws focus on the stability of the QI, the QI’s duty to act as a custodian of the exchange funds and meet the prudent investor standard.

When selecting a QI, ask the right questions to make sure that the QI is already meeting the minimum requirements for states that have already put legislation into place.

For more information on Accruit’s financial security processes, download and review our security data sheet.