How Lewis Altfest makes the alternatives talk not so spooky

One of the most popular sessions at this year’s InvestmentNews Alternative Investments Conference was on how to talk to clients about alternatives.

So my ears perked up Thursday when renowned financial adviser Lewis Alftest shared the pitch he gives to clients about alternatives

“I have a trainer that comes in once a week,” Mr Altfest, founder and principal advisor at Altfest Personal Wealth Management, told an audience at the Financial Times Investment Management Forum in New York. “One time I said to her, ‘Should I do two more sets than normal?’ and she said, ‘It’s good to stretch yourself as long as you don’t think it’s going to be painful.’”

“That’s the story I tell clients,” he said. “I tell them it’s time for them to do a little stretching in their portfolio. Take our common 65% stock, 35% bond portfolio and take 5% from bonds and move it to stocks. So now you know that 5% is going to be more volatile than bonds, because alternatives are more volatile than bonds. Then take 10% of that 70% and move it into alternatives that are going to be less volatile than stocks. Do a little stretching. That’s what I say.”

Talking to clients about alternatives is only going to become more important down the road, given how long the stock market rally has gone on and how high interest rate risk is in traditional bonds.

In fact, seven out of 10 investors said they would consider alternative investments if their adviser recommended them, up from 35% a year ago and 19% in 2011, a recent Natixis Global Asset Management SA survey found.