A financial advisor in Colorado for years piled his clients, many of the senior or elderly investors, into risky, semi-liquid Interval funds, so called because they present limited opportunities or “intervals” for investors to sell their shares on the market and get their money back, according to Colorado securities regulators.
The advisor, industry veteran Andy Hahn with an eponymous registered investment advisor in Canon City, manages $16.1 million for 113 clients, according to the ADV for Hahn Financial Services.
Interval funds and other semi-liquid or illiquid products are typically two to three times more expensive than plain vanilla stock or bond mutual funds or exchange-traded funds.
Many financial advisors believe that an allocation of such funds to older clients should be done with the utmost care because many of those customers need access to their funds quickly for an emergency, such as a lengthy hospital stay.
The office of the Colorado Securities Commissioner has had Hahn on its radar for years.
The regulator sent Hahn Financial Services deficiency letters in 2021 and 2024 for not following industry rules and standards regarding information about clients that is the basis for the recommendation of an investment, according to a September consent order, which describes the sale of Interval funds to clients.
Hahn, who has been in the securities industry since 1985, did not return calls this week to comment. As part of the consent order, he agreed to hire a compliance consultant for his firm.
In the aftermath of the 2007 and 2008 financial crisis, it came to light that some financial advisors had loaded clients up on high-priced, high-risk alternatives. The revelation of such sales practices has lessened over the years.
“After decades of growth in RIAs, advisors who own their own firms should take this kind of minimum responsibility to clients seriously,” said Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services. “Managing clients’ money is a sacred trust. I’m surprised he got off this lightly.”
“Hahn recommended clients hold unusually high allocation levels in the Interval funds,” according to the Colorado order, which was signed by Colorado Securities Commissioner Tung Chan on September 17. “Approximately 40% of [the RIA’s] client accounts were at or near 100% allocation in interval funds during this period.”
“Close to half - 45% - of these high allocation client accounts were concentrated in only one of the Interval funds at 100% concentration at some point during the exam period,” according to the order. “Many of these accounts were held by senior or elderly investors.”
Hahn’s recommended investments included: the Apollo Diversified Credit Fund; the Cliffwater Corporate Lending Fund; the CIM Real Assets and Credit Fund; and the Apollo Diversified Real Estate Fund, according to the Colorado order.
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