Perhaps the primary part of the equation to pull the US economy back from the brink has been in no small way attributable to government stimulus injections. Quantitative easing, without a long diatribe, has created a bifurcated market where equity markets are hitting new all-time highs and the fixed-income markets have been stymied by a protracted low interest rate environment producing inadequate yield.
Fundamental analysis has changed to accommodate the effects of these new stimuli and technical analysis points to the stock market being overvalued as investor capital is being deployed in equities as it appears to be the only game in town. There are a new set of factors one must consider in evaluating investment risk resulting from this systemic paradigm shift. Subtracting your age from one-hundred to determine your equity allocation with the remainder apportioned to fixed-income and cash isn’t a reliable standard any more.
Please forgive the over-simplification. Asset allocation has become, particularly for Advisors, an animal that is extremely difficult to tame. For most of us that learned fundamental and technical analysis early in our financial services careers, well let’s just say, it’s different now. For a large block of the risk averse represented by savers, Baby Boomers and other conservative investors, Advisor trends point to the fact that creating the correct risk/reward mélange has become fraught with peril.
The natural conclusion many are forced to consider now are alternative investments that, on a risk-adjusted basis, satisfy both income targets and risk tolerance. In the absence of the standard tools, many are now exposed to a higher degree of Downside Capture Risk to earn adequate yield to support their liquidity needs. The lack of options has forced many into the equities market out of necessity and familiarity.
The conceptual difficulty many perceive with alternative investments as financial planning opportunities, translated as “too risky,” comes down to the fact that some of these instruments just don’t check the usual boxes to which investors and advisors have become accustomed. If it’s not a “Big Box” ticker symbol or a household-named mutual fund, it’s too hard to understand, people don’t like change and if you hold anything long enough, it eventually comes back around. It’s been said if you stand in one place long enough, the whole world will pass you by.
I needn’t define insanity for you. How this thought process affects the senior/saver/retiree/risk averse is an over-exposure to Downside Capture putting investor principal at greater risk to hit capital growth and income targets.
Like in the game of golf, the harder you swing, the further the ball will travel, right? Yeah…right into the woods. Ask any golfer and they will tell you it’s a very cerebral game. A great swing is all about tempo, mechanics and concentration. If you want to play more golf in retirement, you and your advisor should maybe think about upgrading your equipment and take a lesson.
If you’re serious about retirement, putting your principal at risk because the stock market is en fuego or you got a hot tip from your dentist on a technology start-up, herein lyeth the lesson:
The value proposition presented by Advisors is that they take an unbiased, holistic approach to choosing the best-in-class money managers for a particular investment discipline and allocate investor capital based on the Advisor’s recommended asset allocation. The Downside Capture Ratio is the measure of the Advisor’s selected money manager performances against the appropriate market index to gauge the efficacy of their selections.
If a senior retiree fails to heed the wisdom, the next best or only option may be to sell assets to raise liquidity. For those that must self-impose austerity measures in their budgets to make ends meet, one of the first things slashed from the budget is life insurance.
Life Insurance plays a Dr. Jekyll & Mr. Hyde role. It is hard for the insured to look at their life insurance as anything but a liability as the premium notices show up in the mailbox at the worst possible time. Life Settlement education can provide relief from the strain and pressure of meeting basic liquidity needs for daily life for the insured. It also creates an opportunity for an investor to do well by doing good.
A Senior Life Settlement transaction begins when an insured decides that their life insurance policy no longer suits their needs. The Senior Life Settlement market has emerged out of necessity. Many seniors are finding themselves in a precarious position that their coverage has either become too burdensome on their budgets or the reasons for which the policy was originally purchased have changed. Investing in the Senior Life Settlement asset class provides much needed or wanted liquidity for the senior insured and creates value for the investor in a predictable way unlike anything else under the sun.
Until the Senior Life Settlement market developed, an insured only had two options available for the disposition of their life insurance policy and neither choice was beneficial for anyone but the issuing insurance company. The insured could stop paying their premiums causing their policy to lapse at a total loss or accept the original issuing life insurance company’s surrender offer. Prior to the emergence of the Senior Life Settlement market, billions of dollars of value evaporated every year due to the insureds lack of knowledge that a life settlement was an option. Mr. Hyde, the liability has now become Dr. Jekyll, the asset.
Senior Life Settlement investments present stock market alternatives for Advisors and financial planners to apportion investor capital in the firm’s asset allocation strategy to mitigate the risk of investor principal loss as the Downside Capture hazard has effectively been removed. Life Insurance Settlements are a predictable store of value where there is only one outcome…Predictable capital appreciation with the possibility of early contract maturity upside surprises. IRA safety improves with this passive financial planning strategy as retirement planning fears can be reduced because human error and most forms of investment risk, other than time and illiquidity, are eliminated.
Constructive receipt of the investor’s Total Projected Yield to Maturity is determined by only a single factor…mortality of the insured. Without the investor’s capital, the insured’s life may have been something considerably less than it might have been without this socially responsible asset class and the investor is not dependent on the human element of a money manager’s skill, luck or timing to determine financial performance.
If you are in the Advisor business, Capstone Alternative Strategies is the leading consultancy in the industry and your Life Settlements education is our primary goal. To learn more, call Jason Bokina at 404-504-7006 or email contact@capaltstrategies.com.
Michael J. BradburnMichael Bradburn started his career as President and General Manager of a small automotive sales conglomerate, where he oversaw and managed several domestic and Asian manufactured retail dealerships. After selling the dealerships, Michael then worked with Prudential Preferred Financial Services in life insurance and annuity sales. He later advanced his career in private wealth management at Morgan Stanley-Dean Witter and subsequently Merrill Lynch. Following that, Michael served as Chief Financial Officer of a metals manufacturing and distribution startup, where he was instrumental in securing patents and developing a completely virtual, vertically integrated, manufacturing and distribution technology serving the global powder metallurgy industry. At Capstone Alternative Strategies, he oversees marketing and advisor development. Michael attended Indiana University where he became a member of the Sigma Chi fraternity and later earned his BS from Ball State University.