Use these questions when interviewing potential qualified intermediaries. A reputable QI will answer all of them without hesitation.
Fund Security (Most Important)
- How are exchange funds held - segregated per client or pooled?
- Best answer: Segregated, qualified escrow or trust account at an FDIC-insured bank
- Red flag: Pooled in the company's general operating account
- At which bank(s) are funds held?
- Best answer: Major FDIC-insured institution (look for FDIC coverage on your balance)
- Red flag: Unwillingness to disclose
- Is the client named as the beneficial owner on the account?
- Best answer: Yes - this protects your funds in the event of QI bankruptcy
- Red flag: No beneficial ownership designation
- What is your fidelity bond coverage?
- Strong protection: Coverage of $5M+ from a rated surety company (this is a best-practice preference, not an industry-mandated minimum)
- Red flag: No fidelity bond
- What is your errors & omissions (E&O) insurance coverage?
- Strong protection: $5M+ with a reputable carrier (again, a best-practice preference - higher coverage provides more protection but there is no universal legal minimum)
- Red flag: No E&O insurance
- What happens to my funds if your company goes bankrupt or is acquired?
- Best answer: Funds in segregated trust accounts are protected from creditors; successor trustee provisions exist
- Red flag: Vague or evasive answer
Experience and Track Record
- How many exchanges has your company facilitated? In the last 12 months?
- Best answer: Thousands total, hundreds annually
- Red flag: Very low volume or unwillingness to share
- How long has your company been in business?
- Best answer: 10+ years with stable ownership
- Red flag: Brand new or frequent ownership changes
- Have you ever had a client's exchange disqualified due to an error on your part?
- Best answer: No - or honest explanation of what happened and how it was resolved
- Red flag: Evasion or defensiveness
- Can you provide references from attorneys or CPAs who work with you regularly?
- Best answer: Yes, with names and contact information
- Red flag: No references available
Service and Responsiveness
- Who will be my primary contact? What are their response time commitments?
- Best answer: Named individual with same-day response commitment
- Red flag: Call center with no dedicated contact
- What are your hours of operation? Can I reach you on Day 45 if it falls on a weekend or holiday?
- Best answer: Deadline-day coverage regardless of day of week
- Red flag: "We're closed weekends and holidays"
Fees and Terms
- What is your fee structure? Are there additional charges for multiple properties, amendments, or wires?
- Best answer: Clear, written fee schedule with all charges listed
- Red flag: Vague pricing or hidden fees discovered later
- Do you earn interest on held exchange funds? What portion, if any, is passed to the client?
- Best answer: Interest earned is passed to the client or applied against fees
- Red flag: Company keeps all interest with no disclosure
- Are you a member of the Federation of Exchange Accommodators (FEA)?
- Best answer: Yes - FEA members adhere to a code of ethics
- Red flag: Not a member and unaware of FEA
Scoring guide: Any QI you're considering should score "best answer" on questions 1-6 (fund security) and at least 4 of 5 on questions 7-11 (experience and service). Fee questions (12-15) help you compare value but shouldn't be the primary selection criteria.