Richard H. Thaler is the most recent behavioral economist to win the coveted Nobel Prize in Economics. His work is valuable in understanding why investors do what they do and how a Registered Investment Advisor (RIA) can help save them from themselves with Senior Life Settlements.
In Homer’s Greek epic, The Odyssey, Circe warns Odysseus of the Siren’s enchanted singing that lured sailors to their demise. Odysseus and his crew, wanting to return home safely, solved the problem by lashing Odysseus to the mast and plugging their ears with beeswax.
The poem is a metaphor for the dilemma we all face in life when we are tested by the temptation of, “I want it now” versus, “I will be better off later.” The pain of foregoing immediate gratification for many is too much to bear, even in the face of unapologetic logic.
Experiences that are closer in time take up more of our psychic real estate than those that are further off. Richard Thaler and Hersh Shefrin describe this as the “Planner-Doer” Model. The Planning Self thinks more about long-term happiness while the Doing Self is regulated more by immediate gratification.
As behavioral economics apply to financial markets and investor behavior, experiments have shown that people are sensitive to time horizon. Investors tend to favor low-risk securities in the shorter term and a higher risk-return profile in the longer term. Nothing new there.
That’s all well and good and Thaler, et.al., have applied heady behavioral psychology theories to the financial world. So, again I pose the question: how does this help an RIA or financial planner save investors from themselves? The Siren Song of stock market velocity sings loudly, “Buy me…Buy Me!!!” Let’s face it, watching CNBC say day after day, “Markets set a new all-time high…” is fun.
“We got our interest payment on our treasuries in the mail today…Woohoo!!!,” said no one, ever. As a Registered Investment Advisor, you know that diversification and non-correlation are the plotting Tortoise to the screaming news media’s impulsive Hare.
Senior Life Settlements are an alternative asset class you can use. The benefits of a life insurance asset-backed alternative investment provide surety in the long run as no legitimate claim has ever failed to have been paid in the industries history. And the possibility of a short-term, upside surprise exists too. With no downside capture risk and an estimable illiquidity premium to boot, time is now on your side.
To learn more about us and how we can be an engine for growth, contact Jason Bokina at 404-504-7006 or email contact@capaltstrategies.com.