Today we’re diving into the world of alternative investments (a.k.a. alts)–opportunities that are often marketed with the promise of high returns and diversification, but frequently come with hidden risks and complexities.​

In this episode, Hilary shares the professional insights and experiences she’s gleaned about alts in her 25+ years as a fee-only fiduciary financial advisor with deep expertise in public markets. From high fees and lack of transparency to liquidity issues and potential for fraud, she breaks down why these investments may not be the golden ticket they're often marketed as–and explains how Hendershott Wealth Management® designs client portfolios instead.

Tune in to learn:

• Why alts are so appealing to high net worth investors,
• Some of the biggest risks and pitfalls of alternative investments,
• How to make informed decisions about your investment strategy, and
• Why we believe a well-diversified, low-cost portfolio is the best–and most evidence-based–path to financial security.

Bottom line: The actual experience of holding alternative investments is not conducive to the kind of elegance, simplicity, or peace of mind we pursue for our clients and want for you.

• 01:40 What alternative investments are, what contributed to the rise of them, and why they remain so alluring
• 05:20 The fee structure of alts compared to the fee of a low-cost, globally-diversified index portfolio–and an example of their impact on returns
• 06:00 Talking liquidity: How accessible is your wealth when invested in alts, and what are typical lock-up periods?
• 08:25 Strike three against alts: Lack of transparency and the difficulty of actually being able to value your holdings
• 10:07 Alternative investments + fraud = a few real-world stories you might recognize
• 11:33 Comparing returns from the Teacher Retirement System of Texas (TRS) with the Public Employees' Retirement System of Nevada (PERS) – and making it real for you
• 14:35 Stories about the failures of alts, including high end art, a managed futures fund, angel investments, and CEO theft
• 20:30 The Hendershott Wealth Management® investment philosophy, AKA why we will never accept default risk and what we do prioritize, instead
• 24:12 My final verdict on alternative investments, and how to evaluate investment opportunities

Show Notes
To get access to the full show notes, including all the resources mentioned, visit: https://hendershottwealth.com/podcast/do-you-need-alternative-investments

Follow Hilary on:

LinkedIn

Instagram

YouTube

Hendershott Wealth Management, LLC and Love, your Money do not make specific investment recommendations on Love, your Money or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.

In this episode, we’re continuing our conversation about Ultra Tax Efficient Wealth Management℠—a new-to-market investment strategy designed to help high net worth investors defer capital gains taxes while keeping their portfolios liquid and growth-oriented.

If you haven’t listened to Episode 280 yet, go back and do that because it lays the foundation for everything we’re covering today, including how Robert and I discovered this strategy, vetted it thoroughly, and ultimately decided to offer it to our clients at Hendershott Wealth Management.

Today, we’re diving deeper into UTEWM℠ to talk about:

• How this strategy compares to other common tax-deferral methods (and why others fall short)
• What makes Ultra Tax Efficient Wealth Management℠ uniquely effective, flexible, and IRS-compliant
• The technical underpinnings of the investment strategy, including the application of a long-short market-neutral overlay
• How UTEWM℠ can be applied to retirement distribution planning to potentially save millions in taxes over a lifetime

Unlike most capital gains strategies that require sacrificing liquidity or chasing high-risk alternatives, UTEWM℠ relies on publicly traded stocks in efficient markets and uses a smart approach to defer gains while realizing strategic losses.

It’s a new way of thinking about wealth management, and it could significantly improve your long-term outcomes. It’s exciting, it's flexible, it's widely applicable, and it is better than most–if not all–of the current methods to minimize capital gains taxes.

The bottom line? You don’t have to settle for “bad investments with good tax benefits.” With UTEWM℠, you can aim for great investments with excellent tax benefits.

So if you have (or will have) substantial unrealized capital gains from assets such as employer/highly appreciated stock, business sale proceeds, or real estate, this episode is a must-listen.

Let’s get into it! ⬇️

• 01:26 A reminder of what UTEWMSM is: the strategic creation of taxable losses to offset gains, potentially saving you millions of dollars in capital gains taxes
• 03:28 Alternative ways to avoid capital gains that are “bad investments with good tax benefits”, like Qualified Opportunity Funds–and the opportunity costs they come with, especially if you’re saving for retirement
• 07:09 Solar Tax Equity Financing, and why it doesn’t meet Robert’s “big benefit, low risk” requirement for a good investment
• 08:13 What happens when you break IRS tax rules for the sake of a return–which is what we’d call “bad tax benefit, bad investment”
• 11:10 How UTEWM℠ differs from all other ways to defer paying capital gains taxes, including tax loss harvesting–where the opportunity to take losses tends to dry up over time
• 13:01 The difference between active management and UTEWM℠, why we’ve traditionally avoided it, and the mindset shift we had to make to embrace (and unlock) the potential of this strategy
• 15:05 The reliability and predictability of tax benefits, and why, in this case, “small return benefits” should be of interest to you as an investor
• 15:54 The breakdown of the costs of an Ultra Tax Efficient Wealth Management℠ strategy: trading, financing, and managing – and what can offset those costs
• 19:1

Hendershott Wealth Management, LLC and Love, your Money do not make specific investment recommendations on Love, your Money or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.

Tax deferral is one of the most powerful wealth-building tools available to investors. Why? Because it allows you to reinvest money that would have gone to the IRS, compounding returns on that money and significantly increasing your long-term wealth.

In this episode, I’m joined by Robert Hendershott (HWM’s Chief Investment Officer and my husband!) to talk about Ultra Tax Efficient Wealth Management℠—a suite of services that uses cutting-edge strategy designed to minimize taxes on your capital gains without sacrificing returns or adding unnecessary risk–and why he came out of retirement to help us implement this strategy with our high net worth clients.

Ultra Tax Efficient Wealth Management℠ creates its benefits through realizing investment losses while deferring gains using a long-short overlay composed of individual stocks, which allows tax savings that can continue to compound for as long as the gains are deferred. And over a lifetime, that can be huge.

We can’t overestimate how powerful this new-to-market wealth building strategy is, and in today’s conversation, we’ll start at the beginning, talking about:

✔ Why tax deferral benefits investors and follows the letter of the IRS law
✔ How Ultra Tax Efficient Wealth ManagementSM works, as well as the risks and rewards of this tax-aware investing approach
✔ Why personalized tax management is a must for sophisticated investors

The bottom line? Tax planning isn’t one-size-fits-all. But with the right strategy, you can legally and effectively minimize taxes while maximizing your wealth.

If you know someone who has capital gains in their life, listen to this episode and forward it to them–because this conversation could really alter your financial trajectory for the better by deferring millions in taxes–while keeping more of your money working for you. ⬇️

Here’s what you’ll learn in this week’s episode of Love, your Money®:

• 02:32 The genesis of Ultra Tax Efficient Wealth Management℠ at Hendershott Wealth, including my “it can’t really be this good” moment, and the decision to bring Robert out of retirement
• 06:18 The general benefits of tax deferral and why compounding returns are such an important piece of wealth building
• 09:20 How concentrated stock portfolios affect your ability to leverage tax deferral, plus how tax loss harvesting works – and where it falls short
• 12:03 Breaking down financial jargon to help you understand the high level functioning of Ultra Tax Efficient Wealth Management℠ and how it is designed to create reliable, predictable losses to offset gains
• 15:38 Playing by the rules of the IRS to generate market gains and create recognized losses–so you can have your cake and eat it, too
• 19:24 A simplified-but-illustrative example of a long-short strategy in action for an investor looking to diversify $1 mil of Amazon stock (don’t try this at home!)
• 28:14 How we know UTEWM℠ is legit with the IRS, and why it’s so effective at creating tax benefits
• 28:58 What makes someone a suitable candidate for this strategy, why it hasn’t been widely implemented by financial advisors or investment managers yet, and what’s changed to make it attractive–and approachable–now
• 33:46 The three main strategy risks and uncertainties of UTEWM℠ , and the silver lining it creates when the market goes down
• 38:50 The true pote

Hendershott Wealth Management, LLC and Love, your Money do not make specific investment recommendations on Love, your Money or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.