I know people are full of the joys of spring after the recent spell of good weather, bank holidays and royal weddings. But the fact is that economically at least, we are not out of the woods yet.

The UK economy grew by only 0.5% in Q1 2011, undershooting the forecast of 0.8% and following on from a contraction of 0.5% in Q4 2010. In other words, we’ve only narrowly avoided another recession. In a survey of G7 countries in April, the OECD reduced its estimate for UK growth in Q2 to just 1%. In Europe, even as Portugal has just finalised a €78billion bail out with the EU Greece has started making noises about re-structuring their bail out; and in the US growth slowed to an annualised rate of 1.8% in Q1 as the rating agency S&P changed their outlook on the US from stable to negative.

In short, while there might be some strong projects out there that will be successful, we’re not going to see a return to the boom times for overseas property investment (or indeed selling mortgages, life cover or any of those other agent activities) any time soon.

However there are opportunities out there for agents who are prepared to think differently and move into new territory by selling alternative investments.

5 Key Reasons Why You Should Consider Selling Alternative Investments

1. Unregulated
2. Diversify your product offering
3. A good reason to contact clients
4. Competitive commissions
5. Quick, emotion free sales

Unregulated

Alternative Investments are not regulated by FSA.  Very simply, this means that you don’t need to be a regulated person to sell them, so you can add them into your offering straight away.

Diversify your product offering

If you’ve only got one product or one asset class to talk to a clients about and that doesn’t appeal to them you could be walking away from a lot of potential business. By having a few more options you maximise your chances of finding something they are happy to invest in.

A good reason to contact your clients

If you’ve been talking to clients about overseas property for the last 18 months with no joy, perhaps it’s time to change the record? Alternatives are a great way to re-start the conversation. And if you’ve got a bank of clients you’ve successfully sold property to, that same bank of clients may well be interested in something new if you get back in touch. Alternatives have compelling hooks that pique client’s interest and you may find that clients who you thought would never invest are suddenly willing to take the plunge. The best agents I work with always say “don’t decide for the client – give them the opportunity to say no”

Respectable commissions

Obviously nobody is doing this for free. The commissions on alternatives are attractive and competitive with property and other investments and many agents have successfully added £70 -£100k into their businesses by expanding into alternative investments.

Quick, emotion free sales

Alternatives don’t require leverage; don’t have high AMCs or operating costs; don’t require open ended commitments with undefined exits; don’t require lots of paperwork and regulation and don’t have the sorts of emotions attached to them that clients sometimes do with property.  You can make quick, emotion free sales to boost your revenues.

5 Key Reasons Why Your Clients Should Go Into Alternative Investments

• Diversify portfolio
• Low entry levels
• Termed investments with fixed returns
• Disillusioned with “traditional” investment strategies
• Directly held asset

Diversify portfolio

This is just a fancy way of saying “don’t put all your eggs in one basket”. Most people in the UK have the majority of their wealth in property (their own home and any other property investments). This leaves them seriously overexposed to one sector. No doubt many of your clients fall into this trap.

If they have diversified at all, they will have been advised to invest in either a stocks and shares ISA or a managed pension; and they probably have some cash savings set aside for a rainy day. The difficulty is that when these commonly held assets perform badly, they all perform badly at the same time and people’s wealth takes a serious hit – as we saw in 2008.  Alternatives give clients the opportunity to invest in assets that are not correlated with the markets and that will perform well whatever happens in the wider economy. An allocation to alternatives should be part of every portfolio – alternatives can deliver enhanced returns and stability in times of uncertainty.

Low entry levels

The minimum investment for most alternatives is around £10–£12k with the average investment size around £25-£30k. Low entry levels mean there are far more opportunities to secure investments and do some business, either with clients with smaller pots, clients who are more conservative and don’t want to risk as much or clients who have made a larger commitment to a property investment and are looking for somewhere to invest the remainder of their pot.

Termed investments with fixed returns

Alternatives are often structured to offer fixed returns over a defined period and then return the initial investment back to the investor – very similar to a bond.  This security and stability has a strong appeal to clients. And the returns on offer are very respectable. Clients can easily achieve an average annual return of 8-10% with alternatives. With inflation at around 5% you need a return of around 5.5-6% a year as a basic rate tax payer just to retain your wealth in real terms, so the search for decent returns is important.

And of course when the investments mature there is an opportunity for you to help them re-invest – in this way you can build a long term relationship and a sustainable business.

Disillusionment with traditional strategies

The BBC Panorama programme “Who Took My Pension” in October last year summarised this issue better than I can. You can still catch it on i Player. Investors are fed up with paying high charges for poor performance, little control and no flexibility.

Instead, investors are looking for other options and this explains the growth in SIPPs.  Many investors are choosing to move their underperforming pensions, ISAs and bonds into SIPPs where they can take control of them for themselves, invest them in a wider range of assets and avoid the high fees of the major institutions.

Advising a client on the setting up of a SIPP is a regulated activity, but there are companies out there who will complete that part of the process for you and then hand the client back to you – and you can earn your commission helping the client invest their SIPP, as well as an annual trail.

Quality alternative investments are SIPP accepted and are often the first place clients look when it comes to investing their SIPP after having one too many bad experiences in the stock market.

Directly held asset

Most alternative investments are backed by ownership of a hard asset – a lease on land, a commodity, trees or farmland for example.  This is a concept that clients understand and grasp quickly and prefer to the risks associated with holding paper assets.

Next Steps For You

If you’re earning as much as you would like and don’t see any threats to your business in the near to mid-term future then you probably don’t need to do anything. If on the other hand you are looking for ways to expand and diversify your business and boost your revenues then adding alternative investments into your offering could be the answer.

Trying something new for the first time is always daunting, but don’t let that put you off. Find providers of quality alternative investments who can give you initial training and on-going sales support and help you access SIPP money. With a little bit of effort you could have added a new stream of revenue to your business.