Alternative Investments

Sell her a LI policy. She can make at least 10X on her money, tax free. If she put it into the market she’d have to make a lot more than that to arrive at $500,000, after taxes. Also, she won’t have to wait forever for that $50,000 to grow to $775,000 to achieve that after tax return. It will be guaranteed on day one.

Sorry, Bobby reminded me.  She doesn’t care about wealth transfer.  She literally said it means absolutely nothing to her.  I thought about LI too. 

VA

Something to think about is if you even want this account. If she doesnt recognize the value in having you know her situation before you make a RECO, and she is throwing you a bone of $50K (when her assets may be much much higher than that), she may not be a good prospect.

I am sure you have, but does she know that you can assess her overall situation, and then make an appropriate suggestion after you have the facts?

I know, on the one hand it is good to 'get in the door' and potentially increase the relationship from there... But if she has a $1MM portfolio and she is giving you 5% of it, it may be an uphill battle you may want to pass on...

Canadien Oil Royalty Trusts 

IRA money, folks???



Spiff - this sounds and smells like trouble to me. She isn’t forthcoming w/ information, she doesn’t want any alternative investments although that’s what the money is pegged for. When and what will she spend the cash on, and how much do you want this $50K?

Is she just testing your creativity? 

Tell her to invest the 50k in your business.  She has the confidence to invest with you, maybe she will have the confidence to invest in you?  She might like the idea of being a 'silent partner' in some small way.

Get a good deal and use the money to expand your business.  I'm sure this option hasn't been thrown at her by her other advisors.

Or, just recommend some venture investments.

Tell her that she needs to either give that 50m to her current advisor or move all of her assets over to you.

Bobby is right on with his last comment.

[quote=Bobby Hull]Tell her that she needs to either give that 50m to her current advisor or move all of her assets over to you.[/quote]

Well said, BH.

I'm beginning to like BH's attitude.  I wish I had a little bit of it myself.  The give me your money or screw you conversation just doesn't flow out of my mouth yet. 

This lady has been one of the elephants out there that just stay far enough away to not even be tempting.  I'm looking for a way to take a shot at the whole portfolio, not just the $50K.  If the $50K is the place to start than so be it.  But, I'm not going to cry myself to sleep because I don't get the $$.  I'll keep dripping on her from time to time.  Maybe something will click. 

Thanks for the ideas.  Keep em coming.  

I believe that there aren’t good or bad investments (except in hindsite).  There are appropriate and inappropriate investments.  It is an impossibility for you to recommend appropriate investments without a complete set of facts.  Also, let’s be honest, if you don’t have someone giving you a complete set of facts, you don’t have much of a prospect.

[quote=Bobby Hull]Tell her that she needs to either give that 50m to her current advisor or move all of her assets over to you.[/quote]

That's exactly right. I would use the doctor analogy with her. If you went to a doctor with a hurt arm, and he asked you about your general medical history, and you wouldn't tell him anything (past medication, surgeries, etc.), but told him to "just fix your arm," he would tell you to take a hike. You've got to do the same.

[quote=Spaceman Spiff]

I'm beginning to like BH's attitude.  I wish I had a little bit of it myself.  The give me your money or screw you conversation just doesn't flow out of my mouth yet. 

This lady has been one of the elephants out there that just stay far enough away to not even be tempting.  I'm looking for a way to take a shot at the whole portfolio, not just the $50K.  If the $50K is the place to start than so be it.  But, I'm not going to cry myself to sleep because I don't get the $$.  I'll keep dripping on her from time to time.  Maybe something will click. 

Thanks for the ideas.  Keep em coming.  [/quote]

You're being tested.......what will your answer be?  I used to beat my head in over folks like her.  I can't count the number of $50K accounts I took "hoping" to get the "serious money". 

Clients like her can throw bones until the cows come home.  Most likely she either doesn't trust you enough to give you some "real money", or she is trying to be "nice"..........

If you know her well enough, you could try this:

"Mrs. X, in order to make a good recommendation, I need to know more about how your money is invested with your other advisors.  I don't want to duplicate what you're already doing, and I'm sure you don't want that either, so please share with me how you are invested"..............

If she balks, you have a "bone-thrower".  You then have to decide if you want the account or not.........

I still get calls from old clients that ask me WHY they were not sent transfer paperwork, etc.  My reply is the same: "I am running my business on a fee basis, and I would be doing you and my other clients a disservice if I changed my business model to accomodate clients who don't want to operate on a fee basis.  ______ , who took over your account after I left, is capable and will help you.  In the future, if you are willing to work with me on a fee basis, I would be more than happy to talk further"........

I have already shown her a mutual fund proposal that I use with a lot of clients.  After seeing it, that's when she told me that she's got all of those things covered and is looking for alternatives. 

I did tell her that I would like to see what else she is investing in so that I don't duplicate anything more with my recommendations.  She said that she didn't know that there would be any value to me to see her exact portfolio (or the $$ amounts) and that I should just assume that the portfolio I gave her is pretty much what she is already investing in.  That's when she said if I had investments outside of the norm, I can show her those.  I should have said I work for Jones and we don't do anything outside of the norm and hung up the phone. 

So...dump her and move on?

[quote=Spaceman Spiff]

I have already shown her a mutual fund proposal that I use with a lot of clients.  After seeing it, that's when she told me that she's got all of those things covered and is looking for alternatives. 

I did tell her that I would like to see what else she is investing in so that I don't duplicate anything more with my recommendations.  She said that she didn't know that there would be any value to me to see her exact portfolio (or the $$ amounts) and that I should just assume that the portfolio I gave her is pretty much what she is already investing in.  That's when she said if I had investments outside of the norm, I can show her those.  I should have said I work for Jones and we don't do anything outside of the norm and hung up the phone. 

So...dump her and move on?

[/quote]

sh*t can her. You've already taken a subordinate position in the relationship. You may think that SHE is an elephant, but she doesn't think that YOU are one. This old hag wants a man to boss around and you stepped right up to the plate.

[quote=Bobby Hull][quote=Spaceman Spiff]

I have already shown her a mutual fund proposal that I use with a lot of clients.  After seeing it, that's when she told me that she's got all of those things covered and is looking for alternatives. 

I did tell her that I would like to see what else she is investing in so that I don't duplicate anything more with my recommendations.  She said that she didn't know that there would be any value to me to see her exact portfolio (or the $$ amounts) and that I should just assume that the portfolio I gave her is pretty much what she is already investing in.  That's when she said if I had investments outside of the norm, I can show her those.  I should have said I work for Jones and we don't do anything outside of the norm and hung up the phone. 

So...dump her and move on?

[/quote]

sh*t can her. You've already taken a subordinate position in the relationship. You may think that SHE is an elephant, but she doesn't think that YOU are one. This old hag wants a man to boss around and you stepped right up to the plate.

[/quote]

Bobby's on a roll, and I totally agree.

If you only help her with an alternative investment, one of two things will happen. One, the investment will do incredible, in which case, she will want five more just like it. Obviously impossible. Or, and more likely, the investment will have a bad run. Then, she will think you are a moron because her other stuff is doing ok.  Lose/Lose.

Spiff, 

Call #77, I'll bet they'll tell you to sell her a muni.  Every time I  have ever called them for an idea they recommend a muni.

Seriously, while I wouldn't have the guts to do it, maybe you should respectfully tell her that as much as you'd like her business she might be better served elsewhere since you're not comfortable recommending an investment without knowing how it fits in to her total portfolio.  That may call her bluff.

[quote=justcheckin]

Spiff, 

Call #77, I'll bet they'll tell you to sell her a muni.  Every time I  have ever called them for an idea they recommend a muni.

Seriously, while I wouldn't have the guts to do it, maybe you should respectfully tell her that as much as you'd like her business she might be better served elsewhere since you're not comfortable recommending an investment without knowing how it fits in to her total portfolio.  That may call her bluff.

[/quote]

Why is that so hard? It's the best advice anyone can give the old broad.

In theory it should be easy to let someone go... But in reality it is difficult to drop someone from the pipe ( "I have spent so much time and effort on her..." " I know that if I get this trade it may pan out for the whole portfolio..", etc, etc)...

The hardest and most mentally draining part of our job is to kid ourselves that the losers will eventually 'see the light' and ACAT everything in...

If you didn't work at Jones you could say "We only manage accounts of $1,000,000 or more. I can forward you a client application and then let you know when we are accepting new clients."

That really gets their attention.

[quote=EDJ to RIA]

If you didn't work at Jones you could say "We only manage accounts of $1,000,000 or more. I can forward you a client application and then let you know when we are accepting new clients."

That really gets their attention.

[/quote]

I can still say that moron.  My office, my choice.  It has absolutely nothing to do with Jones.    You could try to say it too, but it would be a lie.  I prefer not to start my relationship with someone with a lie.

Now that I’ve got that off my chest…I get your point.  At some point there needs to be a account size limit.  No more $10K rollovers.  In the growth stage of a business is not the time to make a statement like that.

She's figured out the secret.  Getting a balanced portfolio of mutual funds from a financial advisor is a commodity.  Heck, she's probably figured out that you don't even need an advisor, just buy a strategic allocation fund. 

In order for you to add more value than she's getting from a current advisor, she is now asking you to be a broker and find her an investment that she can't do by herself or her current broker won't do (and no, you don't need to peek at her other investments to do this).  Isn't that what people thought brokers did, find the opportunities?  Alot of savvy HNW people may understand putting 80-90% of their money in a bland balanced portfolio, but for the other 10-20% they want to see you do something to justify your existance.   

I believe that's it in a nutshell.  She feels like she got the major bases covered, so my typical services aren't really necessary.  Now she's searching for other ideas.  But, she's looking in so many different areas, I'm just looking for ideas to show her.  She's going to have to shoot a few down in order for me to really be able to figure out what she's looking for.  That's what the original thread was started for. 

I'm not ready to dump her just yet.  It costs me nothing to keep her on my list.  Right now she's not a great prospect and I realize it.  But I've had some people I never thought would do biz with me open accounts and transfer everything in.  We'll see what happens.  

[quote=Spaceman Spiff]Now that I've got that off my chest...I get your point.  At some point there needs to be a account size limit.  No more $10K rollovers.  In the growth stage of a business is not the time to make a statement like that. [/quote]

To me it's not so much having a stated minimum (though we do), it's more about having the attitude that I make the decision whether you become my client or not. You can't hire me.

I don't try to overtly do this in a snobby way. I just quickly want to discourage the type who will say "Maybe I'll let you take a look at my stuff sometime." Well, maybe I'll consider letting you be a client of mine sometime. But probably not.

Sorry if that sounds uppity, but I've had my share of disappointments after chasing prospects.

I think it was Don Connelly at one of our meetings who said "People want what they can't have and seek that which eludes them." Or maybe I just made that up...

[quote=Spaceman Spiff]

I believe that's it in a nutshell.  She feels like she got the major bases covered, so my typical services aren't really necessary.  Now she's searching for other ideas.  But, she's looking in so many different areas, I'm just looking for ideas to show her.  She's going to have to shoot a few down in order for me to really be able to figure out what she's looking for.  That's what the original thread was started for. 

I'm not ready to dump her just yet.  It costs me nothing to keep her on my list.  Right now she's not a great prospect and I realize it.  But I've had some people I never thought would do biz with me open accounts and transfer everything in.  We'll see what happens.   [/quote]

Well, if we believe ANY studies about HNW folks, they are interested in alternative things, like managed futures, hedge funds, structured notes, etc.

Most likely, she has heard about those and asked her advisors why she's not doing any of them, and they tell her the risk is too great, it doesn't match the investment policy statement she signed, blah blah.  So, she figure she could take a TINY bit if her net worth, and find a guy who WILL sell her stuff like that.

How about covered call writing?  For a lot of folks, that's an ALTERNATIVE investing strategy........

Here's an idea for the lady. Ask her if there is any part of her IRA she never plans on touching, or if she has any older annuities she thinks she will never use. If she answers yes, explain to her that her heirs will receive those assets, but have to pay income tax on the gain. Ask her if she would like to give that money to her heirs with no income tax. If she says yes, get her in your office.

If she's insurable, run an immediate annuity quote (life only) on the amount she is going to leave to her heirs. With that number, take out some percentage for taxes, and use the remaining cash to fund a guaranteed UL policy.  Chances are, she can buy a UL policy that will be larger than the qualified money is now, and when she dies, all of it will go to her heirs INCOME TAX FREE.

The total commission from that deal will start your month out right  

If she doesn't like that idea, kick her to the curb.

now_indy - I asked her about passing money on the her heirs.  She said wealth transfer means absolutely nothing to her.  I love that concept and have used it a couple of times with some other clients. 

I have to chuckle at the covered call, structured notes, managed futures suggestion.  bluestars80 evidently forgot that I work for Jones.  Selling a stock short is an alternative investment for Jones.

[quote=Spaceman Spiff]

now_indy - I asked her about passing money on the her heirs.  She said wealth transfer means absolutely nothing to her.  I love that concept and have used it a couple of times with some other clients. 

I have to chuckle at the covered call, structured notes, managed futures suggestion.  bluestars80 evidently forgot that I work for Jones.  Selling a stock short is an alternative investment for Jones.[/quote]

Jones won't let you do covered call writing?  Man, what CAN you guys do there, besides American Funds?? 

Sometimes when someone says that wealth  transfer means nothing, it really means that they don't want to do it if they must sacrifice something.    One way to get to the bottom of this is to ask, "If God came to you on your death bed and said 'Mrs. Jones, I'll give you a choice.  When you die, do you want me to give your kids a check for $200,000 or $2,000,000?'"

There are plenty of ways in which a portfolio can be structured in which will have no effect on the standard of living on the client, but a big effect on the beneficiaries.

Spiff-I just left Jones a couple months ago and truly believe you are not going to find anything “new and exciting” for her.  Jones just doesn’t have those things available.  I don’t think it is bad, it is just the company philosophy.  I truly don’t see how much of anything in your product list will be different than what she already has.

I’m a noob just out of the gate. BUT I would tell her everything I do is in the context of an asset allocation. 91.5% of all the money made in the market is due to asset allocation. If 91.5% of the money made in the market is because of this where is that money coming from ??????  People that are not using asset allocation. That being said If I cant see the rest of your portfolio and use this $$ to fill in the voids in the context of an allocation I have no choice but to build an allocation model with the $50K

So here is the Target Focus 4 and the Dow Dividend strategy UIT’s lets spread the money out 60/40 in the two trusts and revisit the issue in 15 months.

[quote=Gaddock]

So here is the Target Focus 4 and the Dow Dividend strategy UIT’s lets spread the money out 60/40 in the two trusts and revisit the issue in 15 months.

Sign here.[/quote]

How correlated are those UIT's with the general market? Is this really alternative, or just a different and expensive slice of the same pie?

[quote=AllREIT][quote=Gaddock]

So here is the Target Focus 4 and the Dow Dividend strategy UIT’s lets spread the money out 60/40 in the two trusts and revisit the issue in 15 months.

Sign here.[/quote]

How correlated are those UIT's with the general market? Is this really alternative, or just a different and expensive slice of the same pie?

[/quote]

Who cares? You get paid by the hour and you're SUPPOSED to hate anything that can't be purchased by the hour. How does it feel to have your income capped at the number of hours that you are billable? Do you fudge on your numbers? Everybody that has an hourly rate is dishonest about their billing time.  

Hourly billing is just an easier way to hide your effect on the client's investment returns... and make you feel like you went to law school or something noble.

2 Rip baby

[quote=AllREIT][quote=Gaddock]

So here is the Target Focus 4 and the Dow Dividend strategy UIT’s lets spread the money out 60/40 in the two trusts and revisit the issue in 15 months.

Sign here.[/quote]

How correlated are those UIT's with the general market? Is this really alternative, or just a different and expensive slice of the same pie?

[/quote]

Highly correlated is my guess.  I haven't been able to find, or taken the time to create, the R Squared, but it is a stock portfolio that gets reconstituted every 15 months.  It's given good performance, however, so not a bad investment. 

Gaddock, I'm curious why you use the Dow Target Dividend Strategy coupled with the Target 4.  30% of the Target 4 is the Dow Target Dividend Strategy.  So, right off the bat you've got 30% overlap. Great if the strategy is working, but kills you if it's not.  And there will be a time when it's not going to work.  Is this coupling something you suggest to clients all the time?  Don't take that as a knock against you, just curiousity on my part.  

[quote=Spaceman Spiff][quote=AllREIT][quote=Gaddock]

So here is the Target Focus 4 and the Dow Dividend strategy UIT’s lets spread the money out 60/40 in the two trusts and revisit the issue in 15 months.

Sign here.[/quote]

How correlated are those UIT's with the general market? Is this really alternative, or just a different and expensive slice of the same pie?

[/quote]

Highly correlated is my guess.  I haven't been able to find, or taken the time to create, the R Squared, but it is a stock portfolio that gets reconstituted every 15 months.  It's given good performance, however, so not a bad investment. 

Gaddock, I'm curious why you use the Dow Target Dividend Strategy coupled with the Target 4.  30% of the Target 4 is the Dow Target Dividend Strategy.  So, right off the bat you've got 30% overlap. Great if the strategy is working, but kills you if it's not.  And there will be a time when it's not going to work.  Is this coupling something you suggest to clients all the time?  Don't take that as a knock against you, just curiousity on my part.  

[/quote]

Go to the ftp website and you can play around with different combinations of UIT's.

Spaceman, Are you with Morgan?  If so, structureds will accomplish what she wants.  Just find the right ones.

[quote=AllREIT][quote=Gaddock]

So here is the Target Focus 4 and the Dow Dividend strategy UIT’s lets spread the money out 60/40 in the two trusts and revisit the issue in 15 months.

Sign here.[/quote]

How correlated are those UIT's with the general market? Is this really alternative, or just a different and expensive slice of the same pie?

[/quote]

What makes you think it's expensive?  Over a few years, seems pretty reasonable to me.

He's at Jones.

[quote=wlooney]

Spaceman, Are you with Morgan?  If so, structureds will accomplish what she wants.  Just find the right ones.

[quote=snaggletooth][quote=AllREIT][quote=Gaddock]

So here is the Target Focus 4 and the Dow Dividend strategy UIT’s lets spread the money out 60/40 in the two trusts and revisit the issue in 15 months.

Sign here.[/quote]

How correlated are those UIT's with the general market? Is this really alternative, or just a different and expensive slice of the same pie?

[/quote]

Whats the all-in cost to the client per UIT investment, what's the term of the UIT?

What makes you think it's expensive?  Over a few years, seems pretty reasonable to me.