Jay Pelham of Kaufman Rossin Wealth shares how alternative investment strategies are helping his clients reach their financial goals
Savvy investors realize the intrinsic value of portfolio diversification as a key strategy in mitigating residual risk. This age-old financial truism became particularly relevant amidst the pervasive market uncertainty associated with the ongoing COVID-19 global pandemic, which turned the global economy on its head and prompted advisors and investors alike to reevaluate the way they balance their asset portfolios.
With decades of experience in the financial sector, Jay Pelham, CFP®, is all-too familiar with the dynamic role alternative investments play in organizing a viable long-term investment strategy. As president of both Kaufman Rossin Wealth and Kaufman Rossin Insurance Services, Pelham leverages his more than 30 years of experience advising clients on achieving their financial goals to deliver insight on a daily basis.
Originate Report had the distinct pleasure of sitting down with Pelham to discuss his takeaways from what has been an unquestionably unique 2021 and how these essential lessons learned will influence his firm’s business practices in the upcoming year and beyond.
A Uniquely Diversified Career Track
It turns out diversification is a valuable characteristic not only in portfolio management, but in professional experience as well. Pelham’s multi-faceted career arc is certainly a testament to how a wide range of experiences can pay dividends to one’s capacity to analyze issues from varying perspectives and craft intuitive solutions to novel issues.
Pelham spent the first part of his career focused exclusively in the financial services industry, where he led wealth management and private banking teams for a broad array of clients ranging from Fortune 500 companies to privately owned entities. After 30 years as a banker, he joined Kaufman Rossin, where his past experiences allowed him to fill a dynamic leadership role at the quickly growing firm.
“I was essentially wearing many hats, each tied to my previous experiences in banks and lending,” says Pelham. “At the Kaufman Rossin Group, I provide consulting services for banks, serve as the president of an investment advisory firm, and manage insurance services.”
Thinking Outside the Box: Alternative Markets
Ask any financial advisor what their clients’ main investment priority is, and the overwhelming response is “not running out of money during retirement.” These clients may have the opportunity to choose when they retire, but they unfortunately don’t have the luxury of choosing how the S&P 500 is performing when that time rolls around, nor the price of bonds.
Although a significant percentage of advisors believe their clients’ portfolios are adequately diversified via a traditional 60-40 split of publicly available stocks and bonds, Pelham says that the unprecedented economic conditions experienced during 2020 forced the industry as a whole to question how to deliver sustainable returns whilst simultaneously mitigating risk.
“I think everyone likes to talk about optimal service and hard work for their clients. While that’s certainly true, planning is essential. Kaufman Rossin Wealth distinguishes itself as an investment advisement firm through its ingenuity when it comes to wealth management,” explains Pelham. “You can’t change what is going to happen in the stock market or with interest rates—but you can proactively explore alternative markets like the mortgage and real estate spaces to target positive returns with a low risk profile.”
Kaufman Rossin Wealth identified that a key challenge during the first few months of the COVID-19 pandemic was serving clients who were unable to take as much equity risk as they neared retirement age but still needed income. Building off his experiences in the lending industry, Pelham and his team devised a strategy that delivered stable income without the inherent volatility of the stock market by placing funds comprised of private mortgage loans as a percentage of clients’ portfolios.
“The goal was to build a portfolio that didn’t have the elevated risk profile associated with the stock market but still offered an optimized earning potential,” says Pelham. “It is an ongoing process of selecting the right funds. We have very specific criteria on what entities we work with and we confirm that they fit the proper parameters.”
The value of a diversified portfolio leveraging creative uses in alternative investments looks to be a permanent facet of the wealth management sector—and something that Kaufman Rossin Wealth will continue to implement as a key component of their investment strategy.
“The idea of adding value in the alternative space is not going away regardless of what happens in the stock market and interest rates,” notes Pelham. “Investors will continue to be concerned about loss of capital, especially as they near retirement, and they will continue to seek out financial advisors they can trust.”