Exploring Alternative Investments for Your Retirement Portfolio (Transcript)

March 27, 2023

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In our latest webinar, we discuss the importance of alternative investments in retirement planning. Our speakers emphasized that traditional investments such as stocks and bonds may not be enough to meet the financial needs of retirees. Alternative investments such as private equity can provide potentially higher returns, diversification, and protection against inflation.

The speakers also discussed the challenges of investing in alternative assets, including limited liquidity, high fees, and lack of transparency which are quickly disappearing due to advancements in technology. Jennifer and Jimmy also addressed the rise of crowdfunding platforms as a way to invest in alternative assets. Supervest’s platform allows individuals to invest in private equity deals and other alternative assets with lower minimum investment requirements than traditional private equity funds.

Overall, the webinar highlighted the potential benefits of alternative investments in retirement planning and the importance of working with a trusted IRA provider.



Jennifer Cross  00:09

All right, welcome. We have some people coming in. We’ll give everyone just a second to join us. Before we get started

Jennifer Cross  00:24

right and filling up fast, this is great.

Jennifer Cross  00:38

And we’ll start in just a couple of seconds here. This is a few more participants joining. All right. Hi, everyone, and happy spring. Welcome to the market sense webinar series by Supervest. We’re super excited to have you all here. And today joining us in the show is Jimmy Montgomery from alto IRA. How are you Jimmy, welcome.

Jimmy Montgomery  01:05

Awesome. I’m doing great. I really appreciate you having me on. Looking forward to talking about alternatives and the exciting world of self-directed IRAs.

Jennifer Cross  01:13

Absolutely. We’re happy to have you. All right, everyone. So just so we’re all aware, today’s flow of the conversation will be pretty conversational, if you will. So if anyone has any questions, please feel free to go ahead and put those questions in the q&a box. You should see that at the bottom of your zoom window. And let’s jump right in. So, Jimmy, first and foremost, let’s address the elephant in the room. Obviously, we want to kick things off with what’s been going on in the news lately. SVB, of course, and the bank failures were auto Ira impacted?

Jimmy Montgomery  01:53

Good question. Obviously very pertinent nowadays. The good thing is that also holds no accounts with SBB, or any of the impacted banks over the past week or so. So that also we have no accounts held with them, no real exposure from that point of view. So we maybe dodged a bullet. But we’re pretty lucky in that sense.

Jennifer Cross  02:13

Yeah, that’s good. That’s good to hear. And, you know, for you, our listeners out there, I’m sure a lot may be wondering, you know, a super best impacted and how these issues might impact the MCA space, our primary asset class here merchant cash advance. And the key takeaway from our side, at least is that we anticipate that, the current issues surrounding the regional and small banking sector will ultimately benefit the MC space, what we foresee will occur is now banks will become a lot more cautious, likely, and a lot more restricted in terms of who they’re lending to. Small business owners will then find themselves migrating to an alternative financing tool, which is MCA. So from the investor standpoint, that means better quality merchants migrating over and ultimately better yields and returns attractive returns. But, Jimmy, I’m curious, the topic at hand here, of course, is Ira investing in auto-IRA. So what are some of the benefits of investing through a retirement account or a self-directed IRA?

Jimmy Montgomery  03:24

Yeah, great question. And I think they really boiled down to one thing, and it’s all taxes, be it a self-directed IRA with also be it an IRA at Fidelity or Schwab, the biggest benefit is the ability to legally avoid taxes. So with any IRA investment that you make, be a real estate, private equity, or just stocks, and bonds, you are never going to have to pay capital gains taxes on any and any investment that you make. So I mean, just think about that, theoretically, with the compounding interest aspect of it, you don’t need to pay taxes. So that means that you get to reinvest X amount each time that that investment matures. And so saving a Roth IRA means you can never pay any taxes on it at all. So you invest $1,000 Today, which turns into $10,000 down the line, you don’t pay any taxes on it, that money is all yours. So there are certain restrictions in place for IRAs to try and sort of incentivize you to save for retirement, obviously, the retirement accounts, but their biggest benefit is getting to avoid those taxes, and then we’ll have that investment compound to a greater degree over time.

Jennifer Cross  04:35

Absolutely. And that tax advantage is huge. And speaking of in terms of the types of alternative investments that one can make, through their IRA, what are some of those alternatives that one can access through their IRA? Account?

Jimmy Montgomery  04:53

Yeah, great question. And I think when people typically think of IRAs and 401 K’s four, three, B use whatever type of retirement account, you think mutual funds, low-risk index funds, very standard things that have those longer investment horizons that you just want to want to play careful with. But there are very few people who start understanding there’s a lot more to invest in, especially with your IRA. So things such as private equity offerings, direct real estate, direct financing to businesses, and various companies’ securitized artwork. And nowadays, there are really a lot of innovations in the space to be able to invest in these harder assets, these non-public assets. So there’s a really big growing field of asset classes outside of just what’s publicly traded. And via an IRA. In our point of view, it’s a great way to get into those given us tax advantages.

Jennifer Cross  05:51

Yeah, for sure. And, you know, given our relationship Alto and supervised have been working together a long time, if you can touch upon some of the ways that alto Ira enables or makes it easy for investors to participate in alternative investment, particularly from for MCA, from our standpoint, investors can easily go into their Superfest portal, and just enter their auto-IRA, account information and easily transfer funds in and out of the account back and forth, which is fantastic. So how do you? How does alto facilitate or enable investors to participate across all types of different alternative investments?

Jimmy Montgomery  06:32

Yeah, great question. So I think, I’m not gonna hit on this too extensively. It’s very complex and a little boring. Historically, using a self-directed IRA has been fairly complex, expensive, and time-consuming to do. So. You just need to get an LLC set up an LLC, a checking account all that stuff, it makes it very difficult to do so. And so what Alto went out to do was to make that process easier, cheaper, and much more tech-enabled. So for example, with super vest and our other investment partners, you essentially use your alto account, like a bank account or a debit card, it’s really just the funding option at checkout. So I’d say super best. For example, once you link your alto account, once you identify what investment you’d actually like to make, it’s more or less just selecting IRA as the payment method. And then those funds log in, automatically flow through everything will get credited back to your alto account. And at that point, you hold it in a tax-advantaged manner where you’re never going to pay capital gains on that actual investment that you made. So that’s what supervisors, a lot of our other investment partners, and we’re building out these integrations to make it as easy as possible to get into alternatives with your IRA without having to go through that expensive LLC process.

Jennifer Cross  07:48

Excellent. Yeah, it sounds like it’s easier than ever before, which is fantastic. Now, Jimmy, can we touch upon some of the risks and challenges that investors might face in alternative investing?

Jimmy Montgomery  08:01

I think the biggest risk is in one thing, I can’t really make investment advice or say, to do or not do something. But I think the biggest risk when it comes to alternatives, really is the illiquidity. For the most part with alternative assets. Typically, they have a longer holding period, there is more due diligence that you need to do on the front end, since it’s not publicly traded, and you have all this public analysis on top of it. But that illiquidity aspect of it is one that people really need to take into consideration. Just because if you need those funds, you probably can’t sell them in the open market, and there probably isn’t a secondary market to be able to offload that to get those ones. And that’s honestly one of the things that our founder and CEO when he created this company identified was that, given these longer holding periods, given the illiquid, illiquid nature of these asset classes, Ira actually probably is one of the better places to hold it, given these rules that you have to okay, you’re supposed to get these funds in for a longer period of time, saving for retirement is supposed to fund just for investing, not really for my roof breaks, and I need to get fixed it. That’d be a sort of different type of source of funds. So that longer holding period for the IRA really matches up really well with the illiquid nature of these asset classes. And obviously, it just helps you compound it over time.

Jennifer Cross  09:21

Absolutely, absolutely. And when it comes to selecting the right Ira provider for an investor, how does an investor go about deciding who to go with? What are the things they should be looking out for? How should one go about that?

Jimmy Montgomery  09:40

When it comes to self-directed IRAs, the thing that I had to really tell folks when they asked me this question, which we do get a fair amount, is you need to really understand all of the fees that would be charged for your specific investment. I can’t I’m not going to name specific competitors or anything but also included you Based on the investment that you’re looking to make, what are those fees that are going to be included in there? Okay, are there monthly or annual account fees? Are there fees for custody of these assets are about for wires, really getting that full sense of the fee schedule is vitally important, just because historically, they have been very expensive. They have been for high-net-worth folks. And so they’ve been able to have those fee schedules that sort of accommodate them. And so that’s really an important piece nowadays is understanding what’s this going to cost me because that’s going to eat into your returns, I’ll be it, they are tax-advantaged, and you get to avoid a lot of things. But you do want to make sure that you get a good sense of that. I would say that that second piece is really on the customer experience of it all. Historically, with self-directed IRAs, it’s a very paper-intensive process, it takes things it takes a while to get things done. As I mentioned, it might take about a month or so to even be able to start making investments in that historical manner. So being able to actually have things online, done via tech, be tech-enabled, and not dependent on a service provider from the other side, being able to get in touch with that person is really important. Because with these types of investments, there’s due diligence, typically on both sides of it you personally, but also with the custodian. And so being able to have that open line and consistent communication with your custodian is going to be really important if you need to make a split-second decision, or you need their assistance with moving money. waiting two weeks, obviously, isn’t that so ideal, especially if you’re trying to get a commitment about our commitment, Dave?

Jennifer Cross  11:33

Yeah, that’s huge. And you really touched upon something there. Particularly with our partnership, Jimmy, how easy it is to live with our integration, how easy it is now for investors to go right into that portal, access their auto Ira fund, and invest them not just to RV into our vehicle, but into various other investment vehicles. And it’s my understanding that within the auto Ira website, as well, you guys do have a way for investors to go through your various different integrated partners, and actually select investment vehicles that way and get a little bit of that due diligence done upfront. How does that work? Can you touch upon that?

Jimmy Montgomery  12:14

Yeah, I mean, here at Alto, we do have a couple of options for making these types of investments. Obviously, we have our integrated partners like Supervest, where we do on the front side and understand their offerings, at a high level if it’s going to be breaking IRS rules, we can’t make true determinations around the legality of an investment. But at a high level, understand that is this going to be a prohibited transaction of some sort. So on the front side with the r&d integrated partners, we do a lot of work to validate things and make sure that workflow is easy and simple. But we also do on the more private side, if you say having a private investment that you know of, we do have guardrails in place, we don’t require a three-week long review process just to execute an investment, which is quite common. We do have a lot of technical guardrails in place to allow us to maintain custody and maintain the I guess, then I don’t want to say legal, but the fact that this investment can be made. And that can all be done online through a portal. Again, it really takes about 2030 minutes max to get that whole process set up. So we’ve tried to take everything out on the front side so that we can make this a seamless process and the most efficient possible.

Jennifer Cross  13:33

That’s excellent. Now, Jimmy, I’m curious as far as an investor going in and actually developing a strategy around what their retirement goals are, what’s best for them, and how does also help facilitate that for investors when they’re doing their research. To see what investment vehicles are best for

Jimmy Montgomery  13:52

them? That I guess was what I would say is probably the biggest downside of a self-directed IRA, in general, is that it is self-directed. The public does Fidelity’s Schwab accounts, they’re restricting you just to these public securities, and you can’t do anything else. There’s no need for extra due diligence on this. So with a self-directed IRA, a lot of that review process understanding, okay, is this going to fit my investment objectives, it’s going to help me reach my goals. That is something that’s really on the investor to do. We are there to provide custody and assist in the process of it all. But the actual deciding whether or not you want to make that investment or whether it’s going to fit your goals is something that the investor typically does on their side. Yeah, but I mean as, as ultimately mature, their potential is for them moving forward, but as a self-directed IRA, it really is, okay, we’re gonna have the structure in place for you to be able to make these investments but you need to decide whether or not you want to do them and if it’s gonna fit your goals.

Jennifer Cross  14:56

Absolutely. That’s huge and Jimmy, I guess closing out here at closing up? Do you have any other tidbits or pieces of information that investors should know? When considering alto IRA as their potential custodian?

Jimmy Montgomery  15:15

Yes, I would say the biggest thing with Alto, and I’ve touched on this briefly earlier is, is okay, so you have this investment in mind, investment in mind that you’d like to make, you really need to consider all the facts of okay, is this going to be positive one for me as an investor, but also, how is this how’s the issuer going to expect this because historically, using a self-directed IRA is difficult from both sides. Using investors, it’s going to be expensive and take a lot of time. But sometimes issuers and private issuers, don’t like using them either, because it’s really complicated on their side as well. And so one thing that we’ve tried to do at Alto makes it easy for both sides, it takes about 20 minutes to get your account created here, and it also takes 1015 minutes for them to accept the capital. And so getting a sense of okay, that ease and are they going to be even okay with it. Just given the use of the office process, we believe we’ve done a pretty good job at it. But there are obviously other providers out there as well who have alternative solutions. And so really getting that, that understanding of what’s going on both sides, self-directed IRAs are not for everybody. But if you are looking for that tax advantage and alternatives are of interest to you, then we believe it’s a great vehicle we’ll be holding it in. And we think we have a pretty good process set up.

Jennifer Cross  16:33

Absolutely. And to our listeners, just so everyone’s aware, if you have questions, now’s the time to submit them, remember to put them in that q&a chat box, and we’ll get to those as they come in. And one thing I want to touch upon Jimmy is how seamless the integration has been between Alto and super vest between the support between our two companies and teams, between the technology-assisted ease of transfer, if you will, it seems like the entire process from the technology side to the human element has really been fleshed out in such a way that makes it easier than ever for investors to participate in the asset class of their choice, particularly with super best MCA, we’ve seen a lot of success with the investors that have come our way through alto, it’s been fantastic to see. And luckily to this day, all we hear are good things about our auto customers and what they’ve experienced with you. So all good things. Now odd looks like we have a question that has come in. Let’s see. So with alto investments, with alto investments, Jimmy, what do you foresee as far as the future of investing in alternative investments overall, does also have sort of a big picture, kind of anticipation of where the company will go or where the technology is going to be headed?

Jimmy Montgomery  18:08

Yeah, so I can speak on this to an extent. If you look this in the market, at some of these large endowment funds, these pension plans, you start to see over the past decade, or really the past five years, especially the diversification of these, these various portfolios, they’re really starting to increase their alternative asset exposure. So when you look at the Yale endowment, which is one of the blue chip-like things to look at, they actually have 50% of their portfolio in alternatives. And they’re been continuing to read where about how with millennials and Gen X’s alternatives are really becoming more popular, especially given what the s&p and the Dow have been doing over the past year. So it’s a great diversification tool to have these uncorrelated assets and alternatives. And their returns are typically uncorrelated to the performance of the stock market. So just from a diversification standpoint, it really helps you diversify, and really get these different asset classes that may not impact each other in the same way at the same time. So I’d say that it’s really going to be increasing and self-directed, IRAs are increasing in popularity in general as well. So I think from both sides, from the knowledge that IRAs are able to use this way, along with the access to alternatives, which super best is obviously making really easy. It’s really going to start to increase over time.

Jennifer Cross  19:39

Absolutely. And you said it, I mean, diversification is key. So certainly diversifying into alternatives is very important. Overall. Now we did have a question come in Jimmy, this one reads, and you may have answered this one earlier, but would money from the IRA go directly from alto Back to the super best account without touching the owner’s hands? Can you touch upon that a little bit?

Jimmy Montgomery  20:05

The answer is yes. So it really is just like another bank account or a debit card that you’re using. So you’re never going to see those funds in your personal bank account at all, that would actually potentially be a taxable event. So it actually does need to flow directly from the IRA to that super best deal. And it actually changes the name of the investing entity that actually is making it. So it’s your IRA making that investment, not you personally, and it’s all sort of segmented out. But in short, it does flow directly from also to the bank account that super best has listed for that offering directly.

Jennifer Cross  20:44

Excellent, excellent. And I’m checking to see if we have any other questions, Are any questions coming in from our listeners out there?

Jimmy Montgomery  20:58

One thing I will touch on that I have that people have asked me about a fair amount in my conversations, and it’s a stat that I remember seeing a couple of months ago that 70% of US households, available investments, or investing assets are actually in retirement accounts. So if you have a 401k, or you have a 403 b 457, or some random old retirement account from another company way long ago, you are able to use those dollars in AI in an alternative investing manner. It really dollars are in our retirement account, what I call the retirement account ecosystem, they are able to be moved into a self-directed IRA, you actually want to have help, obviously, with the custodian, you’re transferring to. But those annex unaccessible old funds are accessible and able to move around.

Jennifer Cross  21:49

Oh, that’s huge. It’s really good to know, particularly, you know, investors that want to have options, to invest. Now, we did have another question come in here. Jimmy, The question reads, do you report to the IRS annually on behalf of the account holder?

Jimmy Montgomery  22:05

We do. Yes. So that is in form 5498. And so that form is something that we will make available to you, we’re not going to email it to you directly, but it is available within an alto accounts dashboard to download. But essentially, that 5498 form just tells the IRS to say, Hey, Joe Smith’s Ira has a value of 52,500 in the tax year 2022. So we do report all that to the IRS on behalf of our clients. If there are any tax-related documents that are necessary to provide, we do provide those such as a 1099 R. But really, for the most part, since these investments are made through an IRA, and you’re not paying taxes on them, there are fewer tax documents that are required than say, with a brokerage account where you did a bunch of buys and sells. So anything that is necessary, we do provide it for download. We are a fully online company. Obviously, we have a great support team, but everything will be available.

Jennifer Cross  23:07

Fantastic. Fantastic. Sounds nice and easy for the investor. Now, to our listeners, do we have any other questions in the q&a chat box? Jimmy looks like we’re coming to a close here. Before we’ve got a lot of good information here already. is Anything else that you’d like to add? As far as also anything that you want investors to know? You had all the right points?

Jimmy Montgomery  23:38

No, I’d say for the most part if you’re passionate about a specific asset class that isn’t in the s&p, whatever anything public, there is probably a way to invest in it.

Jimmy Montgomery  24:05

offerings, so there’s like those tax advantages. Probably not bad at all.

Jennifer Cross  24:09

Absolutely. Yeah. I think that the biggest takeaway here is the ability to invest in all types of different alternatives that you otherwise wouldn’t have access to. So it’s huge. And with that, Jimmy, I want to thank you so so much for joining us today. This was excellent.

Jennifer Cross  24:32

And I want to thank all of our listeners here for joining us today. As always, we greatly appreciate your support. And we do look forward to continuing to serve you throughout the year. If any of you have questions or follow-ups or would like to connect with either one of us, please do email us at support@superman.com and we will see you all next time. Thank you,

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