New Alternative Investment Strategies for High Net-Worth Clients

September 25 2023

Alternative investments provide opportunities for diversification and financial stability—and, as such, they can be important components of an overall wealth management strategy. Alternative investments generally appreciate in line with inflation, and, as a result, they can be valuable tools for reducing high-net-worth investors’ market-related risk.

Alternative Investments, Estate Planning & Wealth Management

What qualifies as an “alternative investment”? Alternative investments can take many different forms. Broadly speaking, an alternative investment is anything outside of securities and other traditional market-based investment products that has the potential to appreciate in value over time. Some examples of assets our clients invest in include:

  • Artwork
  • Automobiles
  • Coins
  • Cryptocurrency
  • Hedge funds
  • Private Equity
  • Rare whiskies and wines
  • Real estate
  • Watches

Most alternative investments make for excellent wealth management and estate planning tools. In addition to mitigating market-related risk, they will often serve as heirlooms for generations. Heirs can sell these assets if they wish, or they can hold onto them to pass down to their children, grandchildren, and beyond.

Important Considerations for Acquiring Alternative Investments

While it is true that alternative investments can serve multiple valuable wealth management and estate planning purposes, it is equally true that these investments—like all investments—carry risks. There is no guarantee that alternative investments will appreciate over time, and if tastes, preferences, or trends change, an asset that holds immense value today may not be worth as much in the future.

Alternative investments can also have risks related to liquidity (or lack thereof). While stocks and other securities can easily be sold through national and global exchanges, the markets for alternative investments can be much, much smaller. While it will usually be possible to find a buyer eventually, doing so can take time and cost money. The limited size of the market can also provide leverage in the buyer’s favor.

Lack of regulation is a concern with some alternative investments as well. This is the case with cryptocurrency, for example, and the FTX collapse serves as a stark example of the risks investors face when treading into unfamiliar—and unregulated—territory. Without regulatory protections in place, high-net-worth individuals who put their money into alternative investments can risk losing their assets with limited options for recovery.

Which Alternative Investments Are Right for You?

If you are a high-net-worth individual, which alternative investments (if any) are right for you? Ultimately, the answer to this question depends on several factors. Your knowledge of the market (or ability and willingness to learn about the market) matters, as does your risk tolerance, long-term wealth management, and estate planning goals.

Your personal interests matter, too. For example, starting a rare watch collection isn’t the right choice if you aren’t interested in watches. When making alternative investments, it is important to do so with your financial goals in mind and your (and perhaps your loved ones’) passions in mind.

If you would like to know more about alternative investing, we invite you to get in touch. Please call 419-464-7000 or contact us online to arrange a confidential consultation.