How to Talk to Your Clients About Alternatives
Written by: Jason Plucinak
Alternatives, the diverse class of investments that flies below the radar of analysts and media, has quietly grown to total $6.5 trillion worldwide, a ten percent increase from 2015 to 2016, according to research from Willis Towers Watson.
Ironically, 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. Is now the time?
As the growth has shown, these less-than-traditional options have delivered on their promise of generating return on investment. Additionally, many of these alternative investments are not correlated with the broader market of stocks and bonds. 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, 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 three 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 enemy. By presenting options that have a story your clients can understand and hopefully 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. Get to know investment offerings that are publicly registered and have public, audited financials. If you like an 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 full transparency is a given, your clients know what they’re investing in and are much less likely to end up on the next episode of American Greed.
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 provide the investment’s prospectus and be sure you are following your firm’s compliance guidelines. Use only FINRA-reviewed marketing collateral or brochures (Creating your own is rarely a good idea). Offer up third party articles or links to relevant education on the investment product or asset class. Regardless of how you deliver the information, be an educator rather than a salesperson; 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 and risks 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 alternative investment 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 be a diversifying part of their portfolio, they will also have the confidence that you’re exploring all of the options as their trusted advisor.
Jason Plucinak, Sr. Vice President of Business Development, focuses on Broker Dealer due diligence and education for selling group growth. He is a financial professional with 13 years of experience in the life insurance, securities, and alternative investment industry. With GWG Life since 2007, Mr. Plucinak has helped structure, launch, and distribute six product offerings for the independent broker dealer & RIA channels. Prior to his tenure at GWG Life, he held licensed registered representative positions at Northwestern Mutual Life Insurance Co. and Ameriprise Financial Services. He currently holds a FINRA Series 7 and Series 63 and earned a Bachelor of Science degree in Finance from St. Cloud State University in Minnesota.
NBA Player Carl Landry Demonstrates the Value of Persistence in Life and Work
Written by: Jon Sabes
When you meet Carl Landry, stand-out college basketball player and nine-year NBA player, you imagine that becoming a professional basketball star was a straight forward run for the 6-foot-nine-inch power forward.
However, when you go deeper into Carl’s background, becoming a NBA professional was less than certain and little came easily to the 33-year-old from Milwaukee:
- He was cut from his high school team as a freshman and averaged less than ten points a game when he did play as a senior.
- He started his college career not at Purdue, but a junior college where it was not clear he would play.
- When he finally got to Purdue, he tore his ACL in his knee his first year and reinjured it the next year.
- While his family held a party for him the night of the NBA draft, he slept in the Philadelphia airport after missing a flight following a workout for the 76ers.
- In the NBA playoffs, Carl had a tooth knocked out, but came back in the same game to make a game-winning blocked shot as the Rockets beat the Utah Jazz 94-92.
Landry, who I interviewed on my podcast, Innovating Life with Jon Sabes (www.jonsabes.com), is a remarkable example of the value of “persistence.” In a time where technology creates the image that anything is possible at the touch of a button, persistence is an under-appreciated trait. When I spoke with Carl, I clearly saw someone for whom success has only come through a force of will that made him a NBA player, but it also made him a better player every year he played. That’s the kind of personality that has produced greatness in business as well as sports.
Carl was, in fact, drafted that night he spent in the airport. The Seattle Supersonics chose him as the 31st overall pick and then traded him to the Houston Rockets where he rode the bench for much of the first half of the season. When All-Star teammate Yao Ming was injured, he stepped in and played a key role in the Rockets astonishing 22-game winning streak (the third longest streak in NBA history). And, that season, after sitting on the bench for 33 of the first 36 games, he was named to the All-Rookie second team.
Carl was the first in his family to go to college. “I told myself that this was my ticket out, so I did everything I possibly could to be the best person in school and also on the court,” he said.
His family life in Milwaukee showed him what he didn’t want to do. “Just being honest with you, seeing some my cousins, peers, they went to work for jobs paying six, seven dollars an hour or they didn’t go to work at all and then living off welfare. I didn’t want that.”
When he was first injured, he had to contemplate the end of a career before it even got started. “When you have an ACL tear, it’s over…no more basketball,” he told me. “I said, God, give me health again and I’ll do everything I can to leave it all out on the line and be a successful individual.”
On my podcast, Carl pointed out another interesting lesson he learned in the NBA: Not doing things just to fit in.
“Fitting in was easy,” he said. “Doing everything that everybody else does was easy. If I stood out in some type of way, I’m going to have different results. I’m going to have stand-out results.”
That’s called the “Law of Contrast” and it produces that exact effect of changing the outcomes that everyone else is experiencing. Carl is smart, he recognized that differences make a difference, and doing whatever it takes is what is required to make real, meaningful differences.
Every off-season for the last 11 years, he has run a camp for kids in Milwaukee where he tells youth his story of hard work and persistence. “I always tell the kids to apply themselves and always be persistent,” he said. “If you dream, apply yourself and be persistent. With hard work, man, the sky’s the limit.”
When Carl says the sky’s the limit he means it. He is smart to recognize that it’s important to dream big, because if we don’t – we may be selling ourselves short. “You have to dream bigger than your mind could ever imagine,” he said. “I wanted a nice house. I wanted a nice car. I said, and I got all of that. So, what do I do, do I stop now? Maybe I didn’t dream big enough.” That’s a big statement coming from a kid who grew up to be the first in his family to graduate college and go on to be not only a top NBA basketball start, but a good businessman, father and someone who gives back to the community.
I’m convinced that in whatever he takes on as a basketball player or in his post-hoops career, Carl Landry is not going to stop getting better at whatever he does, and in the process of doing so, make the world a better place.
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