The Fix: Alternative Investments in a Portfolio

Situation:

The Client: A couple who are in the later stages of their careers and who are about to become empty nesters. They both have been involved in the real estate business professionally and have personally invested in it over the years. They have generated a high-income stream which has given them the ability to invest. Their previous financial advisor and accountant had them invest in many illiquid products.

Planning:

This couple has done a great job managing their career and continue to have success in their chosen profession. They began paying closer attention to their financial statements after they felt things “just weren’t adding up”. Upon further review, they discovered the investments weren’t growing by the promised rate of return. He talked to their advisor and accountant but was told to be patient while the non-marketable investments panned out. He came to The Helmstar Group to get a second opinion.

They went through The Helmstar Group planning process and the following variables were uncovered:

  • A large percentage of his investment portfolio was in illiquid investments such as Cattle and non-traded REITs
  • Their risk-adjusted rate of return was very poor
  • A large percent of his balance sheet was in physical real estate
  • They want to quit working and be financially independent in ten years
  • The amount of investment risk they need to take in order to meet all their goals is less than what they’re currently taking

Key Results:

The Helmstar Group analyzed their overall situation, including their goals, desires, and concerns. It provided the family with the following specific recommendations:

  • Opened a brokerage account with a different custodian so the previous advisor stops earning a fee from all the illiquid holdings
  • Provided an appropriate asset allocation which took into account his real estate holdings and other businesses
    • Made sure their overall allocation aligned with their goals as well as the amount of risk they need to take
  • Provided a schedule which showed the most efficient way to unwind the REIT holdings
  • Provided the projected amount of assets they need to have by the time they reach financial independence in order to meet all their goals
  • Set up a savings schedule and opened retirement accounts so they can work towards their target retirement assets

Impact:

The clients are relieved to finally have a full understanding of their current financial situation and are optimistic about the path going forward. The couple are very glad to get away from those who violated their trust and who didn’t have their best interest at heart. They now have a plan to unwind the inappropriate holdings and get into a better long-term allocation. They have a better understanding of why they ended up in their current situation and will be educated over time so they don’t make the same mistakes. It will take time for them to fully trust the process, but are on the right path to get there. They feel empowered to continue working hard and making progress towards their goals, knowing that it will be worth it.


This scenario in principle actually occurred to a THG client. The facts, names, and dollar amounts of this situation have been changed to assure anonymity. This is not a client testimonial and does not represent an actual client’s facts.

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