Two Reasons Why Background Checks Aren't Enough for Investors

When you invest in a company, you're investing in its management.

Savvy investors want to know that a company's senior executives are trust-worthy and will conduct their business with integrity. Here are just two of the many reasons why investigative due diligence is preferable to a standard background check when it comes to investment decisions.

REASON 1: BACKGROUND CHECKS MISS RISKS THAT MATTER TO INVESTORS. 

Did you know that the typical background check only searches criminal records in the state where a person currently lives? Or that they don't identify issues like conflicts of interest and reputation-damaging news articles?

Investigative due diligence identifies risk factors that affect the success of your investment.

REASON 2: BACKGROUND CHECKS AREn't for investment decisions.

Background checks are designed to help make employment decisions, not investment decisions.

Pre-employment background checks are governed by the Fair Credit Reporting Act, which limits the type of information that can be collected and how that information can be used. As a result, most background checks only go back seven years, leaving you blind to any red flags that happened before then.

We know that an investment decision is very different from a hiring decision. Real due diligence isn't limited to the last seven years.