3 Tips for Talking to Clients about Alternative Investments

3 Tips for Talking to Clients about Alternative Investments

Written by: Jason Plucinak

If you’ve been advising clients for more than a decade, alternative investments probably haven’t been on the list of options you’ve discussed with most of them.


Sure, a handful of clients may have been interested in and understood the value of leveraging alternatives, but the majority of your clients’ portfolios likely consist of equities, bonds, and cash instruments. There’s a reason for that: they make sense.

And for decades, these traditional options have delivered on their promise of generating a consistent return on investment. But now times have changed. The Great Recession drove home the need for greater diversification, and an extended low-interest-rate environment has nearly wiped out expected returns on bonds and cash investments. In the wake of such a shift, many advisors are looking to reallocate client portfolios from a traditional 60/40 model to include at least 20% in alternatives. The question is this: How can you introduce alternatives to clients to get them on board?

Here are 3 tips to help you guide the conversation with even the most traditional investors:

1. Present alternatives that are easy to understand.
 

When considering anything new, investors need to understand where their money is going and how it will deliver a return on investment. That means complexity is your nemesis. By presenting options that have a story your clients can relate to, you can help them feel more attached to what they are investing in. Present easy to understand options and your clients are much more likely to feel at ease.

2. Focus on transparency.


Even the most trusting clients aren’t (and shouldn’t be) willing to invest their hard-earned dollars in something that isn’t completely transparent. Point your clients to offerings that are publicly registered and have public, audited financials. If you do like an investment offering that is structured as a Private Placement, use only those with public, audited financials. Transparency allows you to “look under the hood” to easily understand and explain the fundamentals of the offering. What is the risk exposure? How are assets invested? What is the source of the return on investment? When transparency is a given, your clients know what they’re investing in, so you never have to utter the words, “take my word for it.”

3. Follow up with written details—online or off.


Talking through the details of an alternative investment is a great start, but following up with details can support your client’s decision by confirming what they heard in your meeting. Always include the investment’s official prospectus and be sure you are following your firm’s compliance and advertising guidelines. If your website features a client portal, create a webpage devoted to specific alternatives you recommend. Include clear bullet points covering the features of the offering, a brief commentary stating why you recommend the product, and links to relevant articles by third parties. If you don’t offer a firewalled content area on your website, you can provide the same information in a handout or brochure for your client to take home. Regardless of how you deliver the information, don’t try to sell the product; simply provide the research and information your client needs to make a well-informed decision.

Of course, recommending alternative investments to your clients should always be based on your own clear understanding of the value of each offering and how it fits into each client’s portfolio and overall financial goals. To be sure you know the facts yourself, the Alternative & Direct Investment Securities Association offers a broad array of information about a variety of options

Once you have the knowledge you need, remember to keep it simple when walking through your recommendations with your clients. The result: your clients will not only have a clear picture of how alternative investments can help strengthen their portfolios, they’ll also have the confidence that you’re exploring all the options as their trusted advisor.


Jason Plucinak has over a decade experience as a financial professional in the life insurance, securities, and alternative investment industries. Currently Sr. Vice President of Business Development at GWG Holdings, his background includes wholesaling, sales management, and Broker Dealer due diligence. Mr. Plucinak holds his Series 7and 63 license with Emerson Equity LLC a FINRA registered broker dealer.. Mr. Plucinak earned a Bachelor of Science degree in finance from St. Cloud State University in Minnesota.
GWG Holdings, Inc.
Investing in Life
Twitter Email

GWG Holdings, Inc. (Nasdaq:GWGH), the parent company of GWG Life, LLC, is a financial services company committed to transforming the life insurance industry through its disrup ... Click for full bio

Most Read IRIS Articles of the Week: May 22-26

Most Read IRIS Articles of the Week: May 22-26

Here’s a look at the Top 11 Most Viewed Articles of the Week on IRIS.xyz, May 22-26, 2017 


Click the headline to read the full article.  Enjoy!


1. Capturing the Attention of Millennials: Be Relevant and Digital


I know Gen Y are stereotyped as being transient, digital natives who are impossible to capture, but that is just the world we live in today. Technology has caused a proliferation of advancements and the financial services industry is (or should be) feeling the pressure ... — Missy Pohlig

2. Factor in a Smarter Approach to ETFs


Combining an alternatively-weighted index with a multi-factor stock screening process can diversify uncompensated risk, potentially leading to less volatility in down markets and an overall smoother experience for investors. But what are factors and why should they be a major consideration for every ETF investor? — J.P. Morgan Asset Management

3.  Don't MAKE the List ... DO the List


There is something gratifying about jotting down all the things you need to do. It quenches one’s thirst for being organized and for wanting some control over one’s life generally complicated by too many things to do with insufficient time and financial resources to do them. — Roy Osing

4. Smart Financial Advice for Those New College Graduates


College graduation is a time of celebration and pride. It’s also a time of significant financial transitions—for new graduates as well as their parents. As an advisor, this is a great opportunity to connect with your NextGen clients to help them make smart decisions that position them for greater financial success throughout their working lives and even into retirement. — Laura McCarron

5. Advisors: Why You Need to Show off Your Bench


Let your prospects see what working with you will be like, including exactly who will be holding their hand along the way. — Paul Kingsman

6. Why Investors Should Have Confidence in the Future of Investment Management


How should investors feel with all the advances in robotics and technology in our industry in the near future? — John Alshefski

7. 2 Things to Take Your Business From Startup Into A Great Business


Want to know how to grow your business fast? Discover here two things that you need to smash in order for you to take your business from startup to a great business. — Stewart Bell​​​​​​​

8. The #1 Marketing Asset Every Financial Advisor Should Hold in the Portfolio


Unlike many other industries, most people in finance confront the reality on a daily basis that a market downturn they have no control over could cast them out onto the street. — Sara Grillo

9. The Gutless Generation: How Risk Aversion Is Inhibiting Millennial Success


One year after I risked everything to launch my own venture, I penned a short article chronicling my journey up to that point. One commenter responded with near-vitriol, wondering how I could be so misguided as to influence – encourage, even – others of my generation to take on extensive levels of risk in order to successfully launch a new business. — Brian Hart

10. Are Your Marketing Priorities Out of Whack?


People are automating hellos and introductions instead of taking 3 seconds to personally do it. Folks are requiring followbacks if they give you one. Everyone believes that ads are the answer. And business owners think they know what’s best for their social channels. — Ahna Hendrix​​​​​​​

11. 10 Steps to Successful Strategic Alliances


Business growth doesn’t come from wishful thinking. As you know, it takes a lot of hard work. The growth of your business is not an option – it is a necessity. Coordinating the right mix of strategies to gain market share and improve client acquisition rates is essential to advance your firm in today’s economy. — Michelle Mosher

Douglas Heikkinen
Perspective
Twitter Email

IRIS Co-Founder and Producer of Perspective—a personal look at the industry, and notables who share what they’ve learned, regretted, won, lost and what continues ... Click for full bio