To that end, he says, “We found an opportunity zone fund that allows them to sell their stocks but not the capital gains if they move the capital gains into the fund.” That’s a timely solution that’s opened big doors for the firm, he says. Once the clients come in to get their capital gains problem solved, they find out that the firm is retainer-based and they want that too.
The second driver of new business, Hubler says, is that the firm has been helping accredited investors lower their income taxes. When clients with a large W-2 income max out their 401(k)—and yet still have big income beyond that—they don’t have many other levers to push. So the firm taps into natural gas investments that come with significant tax advantages and reduce the income tax for wealthy investors.
“This is a solution that we have been working with; the tax code and the investments have been around since the 1940s, so they are not new. It’s just that most people don’t know they exist. And when their friend gets it from us, they then are talking about it at the golf course, and the next thing you know we are getting calls saying, ‘I want to lower my taxes.’”
The third source of growth has been clients who want to build wealth outside of the stock market through real estate. One way to do that, Hubler says, is through Delaware statutory trusts. These allow investors to put money into a fractional ownership of a bigger property. “So you may have $100,000 of your money in a $300 million brand new multi-family apartment complex … that allows you to build up wealth outside of the stock market in something that’s a hard asset and probably will benefit from inflation if inflation keeps going up,” he says. The trust gives you the tax benefits enjoyed by landlords without actually making you a landlord. Hubler also notes that real estate will go up because of replacement costs and other inflationary forces.
The accredited investment industry is highly regulated, he says, and both advisors and the buying public need to be educated on what it is. “Investors can’t be shown just anything unless they are vetted.”
That’s why he makes a point of finding places where he can be in a room with accredited investors so that he can educate them on investment categories they wouldn’t otherwise know about. At a recent retreat for business owners in Colorado, Hubler says there were two other advisors in the group who knew what he did, and both were eager to meet with him once they returned home.
“They said, ‘I need to talk to you because whatever you are doing is working better than what I am doing,’ and they also said, ‘You look like no other advisor in the world,’” Hubler adds.
The advisors, he says, realized that where they are in their business, they don’t have access to accredited investments. “They have a license to sell it. They have the clients that could need it. But the way they are doing it through their broker-dealer or just the way they are structured, they just don’t have the products,” he says. “So, the writing is on the wall. If you don’t have the solutions for accredited investors, they are going to find the solutions somewhere else, and I am one of the places where they will find their solutions.”
He says he’s not trying to corner the market and is more than happy to help advisors learn what he does so they can join in because the AUM model is not competitive. “Your 60/40 portfolio isn’t much different from my 60/40 portfolio,” Hubler says, explaining that the difference comes down to the makeup of the portfolio.
“Instead of a portfolio in stocks and bonds, I now have investments that aren’t even in the public market, and so they aren’t correlated to market drops,” he says. “And those things are just what [high-net-worth] clients want to have, and it’s actually what a lot of advisors, once they know these things exist, want to do.”