Why IRA Club & Alternative Investments
Let’s get right to the heart of why a smart advisor, sponsors, broker, or syndicators like you always has a basket filled with high-quality alternative investments to offer. Here are 5 reasons why:
1. Sets You Apart
The number 1 reason is when you suggest an alternative investment it sets you apart from the competition. You have seen it before. A brand new client walks into your office and they are skeptical. There is a “So what’s different about you?” attitude in the air.
Same Old Same Old
You understand why. The prospect has already worked with one or more brokers who showed them stocks, mutual funds, and ETFs. Then went back a few months later looking for new ideas, the broker just falls back to presenting the same old mix of stocks, mutual funds, and ETFs. Or maybe, your new client had worked with a Wealth Management Department at a bank where they were presented with (in a nice binder) you guessed it; stocks, mutual funds, ETFs, and bank CDs. This pattern of offering the same old mix of investment options kept repeating no matter where they went.
A New Perspective
Now they have come to you, certainly, you will not consider the old mix. Maybe it’s a real estate syndication paying more than REITs. Or an oil and gas project in a newly discovered field. Perhaps an attractive package of Life Settlements. At once, you are a standout. Your prospect’s posture changes. They start to lean in and you hear, “Why didn’t my last advisor show me this?”
Might you also place this client in a mix of stocks, mutual funds, and ETFs? Sure. However, what is the investment they will think about as they leave your office? What is the investment that sets you apart from every other advisor they have spoken with? What is the investment they will brag about to their friend? Being able to offer alternative investments sets you apart. It makes the client feel you have resources and ideas no one else has and that you worked hard to find something just for them. Plus, what about referrals? Don’t you think their friend (the one they told about your creative work) will soon be calling you to set an appointment?
2. Set It and Forget It
Set it and forget it. For some magical reason, clients don’t require frequent handholding or reassurance after they invest in an alternative asset. They see it as a long-term engagement. The difference between a portfolio that is all equities and one that holds some alternative investments is understandable. It’s because, there is no one on CNBC at 9:00 AM saying, “The market is on a bull run that will last for years. Everyone should start buying stock with both hands”. Then at 10:00 AM someone else is saying, “The stock market is in the last days of Pompeii, soon investors will be buried in a storm of volcanic ash. Quick, get out now while you can”.
3. Low Volatility
Alternative investments are almost never correlated to the stock market. Hence, in a single masterstroke, you helped reduce the volatility risk of your client’s portfolio. The President gets the flu, the Mexican GDP is up, the Canadian GDP is down, the price of cocoa is flat. Your client does not care. They know the real estate syndication with 2100 units in Colorado you put them in will still be filled with renters and the dividend checks will keep coming.
4. A Finely Tuned Portfolio
Alternative investments allow you to fine-tune your client’s portfolio. Let’s say client “A” is heavy in blue chip stocks and AAA bonds. Okay, maybe an oil and gas exploration program would be a good fit. While client “B” has a portfolio that’s less “blue blood” and you want to build in some stability. How about a solid real estate program? If the client is filled with short-term investments, possibly a well-crafted life settlement package is the right long-term fit. This fine-tuning is where your experience and training allow you to shine, and the client will notice and appreciate your skill and the interest you have in their well-being.
5. A Perfect Source of Funds
The icing on the cake is the funding of the alternative investment. By some estimates, up to one-half of all alternative investments are funded from an IRA. The fit of investing in alternative assets using IRA funds makes sense. Many alternative investments have a longer duration. IRA money tends to be patient money. The owner is more likely to view their IRA as a long-term investing tool. Using an IRA reduces the need to find new money. IRA money is already in place and just requires a simple transfer to a Self-Directed IRA Administrator. Once the Self-Directed IRA owns the investment, the income tax on the dividends and earnings will be deferred for years to come. If the investor chooses, the entire account can easily convertible to a Roth IRA to avoid future income taxes for life.
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IRA Club may terminate the membership to the program if your Account is inactive in any continuous twelve-month period as defined in the program requirements. IRA Club may terminate the membership immediately if; a) the applicant fails to pass the ongoing checks performed by IRA Club) the applicant becomes insolvent, becomes the subject of a bankruptcy or receivership proceeding, makes an assignment for the benefit of creditors, has a substantial portion of its assets seized or attached, or is no longer authorized to conduct business; c) the applicant is (or will be) merged into or is (or will be) acquired by another entity that IRA Club determines, in good faith, is not financially sound or lacks the experience, ability or capacity to perform the obligations required by this program. IRA Club reserves the right to make changes to its B2B program at any time. IRA Club also reserves the right to make changes to the products and services offered at any time. (ie. Type of accounts offered, fees, marketing, etc.). Upon any termination of this agreement, the applicant will immediately return to IRA Club, or at IRA Club’s request destroy, all copies of IRA Club confidential information in its possession or control or will certify to IRA Club in writing that it has destroyed all such confidential information.