There are a number of interesting new, and old, ideas that are morphing into clever ways to “Democratize” this and that and that’s clearly evident in the investment industry. It’s refreshing to see more inclusivity to free-market capitalism. Literally, the power to build wealth in the palm of your hands is here.

This is a great way for young people and those without a lot of money to tippy-toe into investing and learn in real time with real money about risk, reward, diversification and maybe a thing or two about their own emotional investment quotient before the stakes are somewhere between “Pass me the Grey Poupon” and “Hi, Welcome to Walmart.”

Fractional Share investing is gaining momentum as a more democratic way to expand the reach of the stock market. Rather than buying a whole share of a company, investors are able to buy tiny increments of a single share of stock or ETF. This lowers the barrier to entry and a percentage gain or loss applies itself equally to any size position, right? Generally, brilliant.

And what about the Department of Labor’s decision to allow Defined Contribution Plans to offer Private Equity Funds in your 401k. The diversification benefits of being able to put your retirement dollars to work in the non-publicly-traded business sector is a nice addition. Booyah Jim, Booyah.

Blackrock, in its own orbit, set a tone that only Environmentally Sustainable Governance (ESG) investing would do moving forward. I read a very interesting article the other day that suggested for the Socially Responsible class of investor, reporting the effectiveness of a particular company’s agenda to make the world a better place might be preferable to the old Gain & Loss Statement. Isn’t that kind of like Clark W. Griswold playing “Pick a Number” with Cousin Eddie in Vegas Vacation?

Yes, the sarcasm continues. So, I’ll illustrate my point about the old, the new and how technology makes everything ok.

  • 1998: “Don’t get in a car with strangers”
  • 2008: “Don’t meet people from the internet alone”
  • 2018: UBER…Order yourself a stranger from the internet to get into a car with alone”
  • 20XX: “Just think ‘Elon Musk’ and a car with no stranger in it shows up”

So, if you read between the lines at all here in identifying some of these trends, there is certainly some really good ideas here. It will come down to execution as to whether they become the “New ETF” or not. It’s the financial services industry pivoting to accommodate a new class of investor while maintaining the relationship with their existing client base. The only problem is they are offering the same solution that they always did to everyone and calling it something different this time.

The Department of Labor opening up a new channel to 401k investors that is not exclusively ring-fenced within the broker-dealer community signals that alternative asset classes need a bigger voice because markets can’t deliver diversification with the old 60/40% Stocks and Bonds allocation anymore. Stocks cannot continually be the only game in town.

Many of the shiny new toys Wall Street and the innovators are rolling out are new versions of the same thing. Markets. Volatility. Unknowns. Porky just got a new shade of lipstick. How democratic?

Wall Street and the future should not have complete control of your finances. To truly differentiate asset classes and achieve diversification in your portfolio, you have to have assets that work in different ways to offset the risks of the known and the unknown.

Senior Life Settlements as an asset class tick many of the boxes that investors, novice or seasoned, want that Wall Street just won’t deliver:

  • Diversification: Life Settlements work differently mechanically than markets and are immune to factors that cause price instability in other asset classes.
  • Differentiation: The income engine in a Life Settlement is an insurance policy on a senior insured an investor owns at a significant discount.
  • Non-Correlation: Life Settlements are unaffected by market volatility, credit markets, interest rates, geo-political unrest and natural forces.
  • Risk Management: Using alternatives in an asset allocation of stocks, bonds and other market securities can reduce overall portfolio volatility.
  • Fractionalization: Diversified portfolios of life insurance contracts are divided into units or shares of equity in multiple-policy portfolios to broaden participation amongst accredited investors.
  • Social Responsibility: Policy sellers are aged individuals with no longer wanted, needed or affordable coverage that now have an additional option to sell their policy in a regulated secondary market to maximize the value of their asset.

So yeah, democratization is the new buzzword du jour but it’s a new way with the benefit of technology to keep us all feeding from the same trough. It’s one thing to talk the talk. It’s quite another to walk the walk.

For more information on how Senior Life Settlements check all the boxes for your clients and prospects, call West Coast Settlements at (657) 254-4300 or send an email to info@westcoastsettlements.com.