There are two basic applications of a pitchbook used by an investment banking firm. The first form of pitchbook tells a potential investor about the firm itself. The second type of pitchbook is related to a specific deal the firm is offering. In order to get a look at a pitchbook, you must either be a client or be considering becoming a client. These items are not published. Once you get a look at a pitchbook, you may be overwhelmed with information. Focus on the key elements within your comprehension.

Skimming a Firm's Pitchbook

A firm's pitchbook will lists items like the number of analysts present, the background of the firm and past successes. A firm's pitchbook is similar to a prospectus, but it goes a little further into depth in attempt to answer questions you may have about how well the firm can handle your business. You may have an idea of your comfort level with investments. For example, you may want a firm that is rather small, appealing to novice investors and specializing in slow growth options. Alternatively, you may want a firm specializing in the opposite direction, sophisticated and risky futures or commodities options, for example. Read about the firm's previous successes, and you will have an idea of where it shines the most.

Skimming an Offer's Pitchbook

Once you are already a client at a firm, you may see a particular pitchbook for an offer the firm is attempting to sell you. For example, there may be a pitchbook for an upcoming IPO or ongoing merger. The investment firm is telling you it feels this would be a good investment; the reasons why this may be a good investment are also listed. The firm specifically discusses its own expertise in this area, assuring you it knows why this is a good way to spend your money.

Finding Facts

A pitchbook is just what it sounds like: a book of sales pitches. All sales pitches highlight the positive aspects of a potential deal and often exaggerate successes. So, the trick is to look beyond fancy language, pretty images and other fluff to find the facts. You will want to know:

  • Does the firm meet all federal requirements, including a capital budgeting requirement? 
  • Is there a minimum investment threshold? 
  • What are the backgrounds of the advisers at the firm? 
  • What types of investments does the firm specialize in?
  • Has the firm held a consistent investment philosophy for many years?
  • Has the firm been involved in any lawsuits, including SEC sanctions, in the past ten years? How were these handled?
  • How consistent is the message delivered by the firm across departments and across years?

Additional Considerations

You may individually have other requirements of your financial firm. Additional questions to consider are these:

  • Does the firm allow margin buying? If so, what is the margin account minimum?
  • What are the priorities of the average investor with this firm? Do they match your own?
  • What are the transaction fees?
  • How active is the management in encouraging new investments or managing your portfolio?
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