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.
How to Introduce and Position Yourself the Right Way
Introducing yourself – more to getting it right than you think!
What do you say when someone asks you “so what do you do?”
You might say, “I’m a financial advisor”. Or “I’m an investment advisor”. If you’re a top advisor, you might be compelled to say “I’m Vice President and Portfolio Manager”. Or even “I’m a CFA”.
Well put all of those away if you’re introducing yourself to a woman you might want as a client. None of the above will impress her – she might even “run for the door” thinking you’re going to try to “sell” her something.
Your goal is have her say “tell me more about that”.
So what do you say?
Here are 4 quick tips:
- Make it about your clients
- Make it about outcomes
- Make it interesting
- Make it fun
How about something like this: “I help people have their cake and eat it too”. Doesn’t that beg the question “what does that mean” or “how do you do that”.
Okay maybe that’s a bit over the edge but it’s important you make it about the people you help and not about what you do to help people get there.
I help <type of people you serve”> <achieve this>. Something like:
- I help retirees create a sustainable income.
- I help women understand money on their terms.
- I help young couples get a good start towards financial security.
Now you try it! Send us your best one.
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