Eric Satz: CEO of Alto Explains Why Self-Directed IRAs Are Powerful Vehicle for Portfolio Diversification

We recently caught up with Eric Satz, CEO of IRA platform Alto, in order to discuss why alternative assets are the new bonds when it comes to portfolio diversification.

As the head of a self-directed IRA that enables individuals to diversify their portfolios using retirement funds, Eric addressed why conventional retirement planning strategies – like sticking to a 60/40 asset mix – is an outdated approach for today’s retirees.

He also talked about how alternative assets can improve the long-term stability and success of investment portfolios. He further commented on why now is as good a time as ever to look beyond stocks and bonds into alternatives. He explained how we can leverage the $39 trillion pool of American retirement funds more fully.

Prior to his role as founder and CEO of Alto, Eric worked in investment banking at DLJ/Credit Suisse and co-founded several companies, including: Currenex, an FX trading solution sold to State Street for more than $550M; Plumgood Food, and; Tennessee Community Ventures, a VC firm.

He also served on the Board of Tennessee Valley Authority from August 2015 to January 2019.

Our conversation with Eric Satz is shared below.

Crowdfund Insider: What drove you to start Alto?

Eric Satz: The idea for Alto stemmed from a personal experience. About a decade ago, I was managing a venture capital firm here in Nashville and wanted to invest alongside the fund. As luck would have it, an IRA statement showed up in the mail as I was getting ready to make an investment and that was the moment that I wondered whether I could use my IRA funds to invest in private, or alternative, investments.

I discovered I could use a self-directed IRA, but the trouble was no easy solution existed at the time and there was no one to really help me. I had to figure it out on my own.

All told, the process took about 10 weeks and involved way too much paperwork. I did all the work and at the end had to pay the custodian for the privilege of completing the investment. After repeating this process twice more—each time with a new custodian, each time more frustrating than before—I knew there had to be a better way.

I reasoned that if it was this challenging for someone who had spent years in investment banking, how could someone without my background be able to take advantage of this same strategy? Alto was born out of the idea that all Americans should have the same investment opportunities to secure their financial future.

Crowdfund Insider: Based on current market conditions, is there more of a need for portfolio diversification and investing in alternative assets than in the past?

Eric Satz: Today’s turbulent markets have made it more critical than ever for investors to diversify their portfolios. Unfortunately, true portfolio diversification opportunities have historically been off limits for many everyday investors.

While most retirement accounts are invested almost exclusively in public stocks, bonds, mutual funds, and the like, wealthy and institutional investors have been allocating anywhere from 10% to 50% of their portfolios to alternative assets. Not only has this strategy of investing in private market investments historically delivered higher returns beyond the market average over time, it can also help reduce volatility and risk.

So rather than continuing to adhere to the underperforming 60/40 mix of stocks and bonds, a better strategy might be to aim for 20% exposure to five different asset classes. Or, depending on your risk appetite and time horizon, a 50/30/20 approach of 50% stocks, 30% bonds, and 20% alternative assets.

Crowdfund Insider: How does this change how we look at retirement?

Eric Satz: Unlocking access to alternatives is just one piece of the puzzle. Another is tapping into retirement funds to enable everyday Americans to invest in the assets they’re interested in. For many, these funds are their largest, if not only, source of investable assets.

Portfolio diversification is top of mind for the majority of millennials, according to a survey we conducted last year that found that 71% feel their investment portfolio could be better diversified. However, today, true diversification is not possible without exposure to private funds and companies, real estate, crypto, and other alternative investment vehicles, making self-directed IRAs a powerful vehicle for portfolio diversification.

Crowdfund Insider: Why do you think many Americans feel apprehensive about investing?

Eric Satz: There’s an enormous financial literacy gap in this country, because we don’t prioritize financial education. We prioritize the accumulation of money, sure—but not how to go about earning it or what to do with it once you have it. As a result, many people lack the confidence they need to fully participate in the financial system.

Crowdfund Insider: How would you describe Alto’s greater purpose? What kind of broader societal impact does it have?

Eric Satz: Our mission at Alto is to make financial security and sustainability achievable. Investing for retirement is one of the most important things we can do to achieve this end and portfolio diversification is a crucial part of that process. However, today’s market uncertainty combined with other financial priorities has made that challenging.

If we don’t do something different, we’re going to have tens of millions of retirement age individuals living in poverty by 2050. Alto’s self-directed IRA platform provides a simpler, more affordable option for individuals to invest their tax-advantaged retirement savings into alternative assets and have true portfolio diversification.

Crowdfund Insider: What’s your market outlook for the rest of 2023? What trends do you anticipate to see this year?

Eric Satz: Nothing new to report here: I believe we will continue to see market volatility in the public markets and crypto as fears of a global recession, interest rate tightening, and regulatory concerns linger.

However, I am encouraged by the many new technologies providing investors more options to control their financial futures.



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