Financial Advisors and Alternative Assets

Concerns about interest rates, inflation, and general uncertainty about securities markets’ direction prompt some investors to purchase hard assets. For the first time since the late 1970s, twin concerns of rising inflation and higher interest rates make some investors consider these assets.

1. Discuss your customer’s objectives and the suitability of these investment assets for his portfolio. Many financial planners advise their customers against investing more than 10 percent of investment capital in potentially illiquid investments. Depending on how your customer purchases gold, for example, may depend on how easily he may liquidate holdings and at what commission percentage rate.

2. Customers may not understand the concept of ready liquidity as it applies to tangibles like gold. Advising your customer during an open and honest discussion builds the relationship, and reflects fiduciary responsibility. Explore opportunities to meet your customer’s needs without exposing their assets to unnecessary and unsuitable risk.

3. Similarly, investing in oil may appeal to your customer. There are many ways to speculate on the price of oil. If your customer buys futures, regulated by the U.S. Commodity Futures Trading Commission, liquidity is not the primary concern. However, purchase of commodities contracts may expose the customer to as much as 20:1 leverage. This kind of investment may be inherently unsuitable for a small investor.

Prepare to offer clients sage advice when they ask your advice.

Leave a Reply

Your email address will not be published. Required fields are marked *