For the past 15 years we have focused on stock market alternatives that help protect and build wealth during retirement. There are now a number of classes of investments available to individuals that were previously only available to institutional investors. There are also important tax strategies that can reduce taxes and increase income during retirement, all without the volatility associated with traditional stock market investments.
Institutional Investments for Individuals
Technically, an investment vehicle is considered “alternative” is if it is outside the three most common investment types: stocks, bonds, and cash. Advisors have more latitude when working with alternative investments. Many stock market alternatives are also protected and regulated by the government and offer different types of returns and tax advantages than traditional retirement accounts. Some alternative investments include commodities, real estate, and even fine art.
New investment vehicles are making investments that in the past were commonly used by endowments, hedge funds and high net worth individuals available to ordinary investors. My goal is always to help retirees get the most value they can out of their investments, and to live the retirement dream they’ve always imagined. No one can control everything, but I truly hope no one has to live through another nightmare like the ones we’ve experienced in the past two decades.
Learning from History
In the first 15 years of my career, I helped younger professionals and families grow their pre-retirement savings. Since then I’ve been mostly working with post-retirement clients; those people who are either already retired or within a few years of retiring. I made this shift after I saw how the three-year market rout that began in 2000 wreaked havoc for retirees and for people ready to retire, I realized that the system was broken.
The crash of 2000 devastated many retirees. I saw the damage first hand, and never want to see another client go through such turmoil. The conventional wisdom has always been that stocks and bonds will perform best over time and to gradually shift to more conservative investments as investors get closer to retirement. But in 2000, nothing was spared and many people’s retirement savings were wiped out.
I also saw what happens to people when they are overwhelmed with financial fears. Some of our own clients blamed us for their losses. It was a terrible experience. I didn’t want to continue with business as usual, and I felt that I needed to take action. I embarked on a year-long sabbatical to seek a better alternative for my clients.
New Regulations Limit Investment Options
After the crashes of 2000 and 2008, regulators are putting strict limits on how advisors can guide retirees through tax-deferred retirement accounts like IRAs and 401(k) accounts. Many believe that the goal is to move people toward extremely safe index-based funds. While this is intended to prevent advisors from steering people to riskier or more expensive (read: profitable for the advisor) investments, it may have the unintended consequence of people staying in stocks in retirement by default, due to lack of guidance or information, only to be victimized by the next stock market crash.
A Different Model
We have moved to an endowment or institutional style of portfolio management, making good use of alternative investments. Our goal is to protect retirees from stock market shocks and to create a stable, predictable source of income and growth. We have now developed a system for investing that seeks to minimize volatility, mitigate downside risk and lower taxation.
To set up a consultation with me at Lamont Financial Services, call (415) 883-5200.