Alternative investing is the act of using one’s retirement monies (e.g. 401(k)) to invest in other potential growth or diversification strategies that go beyond the traditional sense of investing (e.g. mutual funds, ETFs, etc.). These strategies can include investment options such as private stock, qualified employer securities, joint ventures, real estate, hard money lending, agriculture/maritime rights, bitcoin, and more.
As a financial advisor you want what’s best for your client, right? Well, you do, but you also want to build and maintain as much assets under your advisement as possible, because, let’s face it, the more there is the more you generally earn. Are we overstating the obvious?
When it comes to alternative investments there are a number of reasons why financial advisors have historically cringed at the idea. Besides the loss of assets under advisement, which is not ideal, there is also a sizeable commitment to learning about alternative investing and the necessary processes and legal requirements that must be met with varying transactions and investment types.
Nonetheless, alternative investments are becoming increasingly popular with investors, and financial advisors are now finding themselves in a bit of a paradox: if you help your client invest in alternative investments you could be risking or even losing revenues for yourself, but if you don’t help your client they may pull their assets altogether and find someone else willing to help them. Sure, you could try a different approach and attempt to avoid this dilemma by persuading your investors that traditional investing is the far safer choice. However, as more and more opportunities for alternative investing becomes available, you might want to consider how alternative investing can become an additional component of your services and possible solution you can offer your clients.
Luckily, there is an easy solution that doesn’t require you to hit the books and learn everything there is about alternative investing. You can partner with a Third-Party Administrator, like Leading Retirement Solutions, that specializes in alternative investments within retirement plans (e.g. 401(k), 403(b), Defined Benefit, ROBS, ESOPS, etc.). Our partnership with you and proven methodology allows investors to use a portion of their retirement money to invest in some form of alternative investment, while keeping the majority of their assets under your advisement.
Furthermore, by bolstering your service offerings to include alternative investments you will not only make your current clients happy by increasing their investment opportunities, but also you will see an overall increase of assets under your advisement over the long run. Here’s the best part, to incorporate this strategy you won’t even have to become an expert in alternative investing because you will have Leading Retirement Solutions to rely on. Let’s dive into this a little further.
Satisfy Your Client’s Interests in Alternative Investments
Remember when there wasn’t a coffee shop on every corner, there were far less breweries in the U.S., and the housing market was still reasonable? We’ve all seen new types of investment opportunities pop up and quickly become the driving force behind the herd mentality of eager investors. Bitcoin and investments in the cannabis industry are a couple recent examples. However, other types of alternative investments have been around for decades and continue to be popular among investors, such as real estate or a new business venture. In fact, most alternative investing can be summarized into a handful of categories:
- Shares/ownership in a business, including private stock, Qualified Employer Securities and ROBS
- Membership interest in other ventures, including LLC units
- Real estate
- Agriculture and maritime rights
- Hard money lending, promissory notes, other types of loans and liens
- Assets such as equipment or livestock
Investors seek these opportunities as a way to diversify their assets beyond the stock market as well as look for opportunities with greater growth potential. For example, here at Leading Retirement Solutions we have increasingly seen many business owners seek out alternative investment strategies to reinvest in the growth of their own businesses. This very effective strategy, in general, allows participants to invest retirement plan money rather than other personal finances, thereby mitigating tax implications and minimizing the inherent restrictions that come with more regulated investments.
Rather than risk turning off your client by telling them they can’t or shouldn’t invest in alternative assets, indulge them. If they want to pursue an alternative investment, seek out a professional in that arena, like Leading Retirement Solutions, that you can partner with to support your own services while keeping your client happy.
Consider Alternative Assets Part of Your Long-term Strategy for Client Retention and Asset Growth
When encouraging your clients to be in a long-term mindset, you regularly talk about growing assets and building wealth, right? Well, now it’s time to take some of your own advice. Over the years, Leading Retirement Solutions has facilitated a number of alternative investment strategies that investors have engaged in, and over the course we’ve encountered some interesting trends.
In our experience, investors like the idea and the possibility of being able to invest in other forms of assets outside the traditional realm of mutual funds, ETFs, stocks and bonds. Particularly, business owners want the option of investing in alternative assets because they want to know that they have more than one option or solution available to them, and more so, they don’t generally like being told “no.” But several of these investors never commit to investing in the assets, even though they were addiment with their financial advisors that this is what they wanted. Ultimately, they keep all their assets in their traditional investments and nothing more happens. The financial advisor that indulged their client’s request ultimately kept all his/her assets under advisement.
For those investors who do pursue alternative investing options, what we have seen is that the majority of successful investors end up pouring even more money back into their traditional investments, much more than what they had originally pulled out. Furthermore, investors that used an alternative investment strategy to either start or grow a business typically ends up bringing their employees into the 401(k) Plan as their company grows, increasing the assets under your advisement. So, ultimately, while you may initially lose some assets under your advisement by indulging your clients request, you will most likely gain even more down the road.