Advisors should use all asset classes—not just stocks and bonds—to help clients achieve retirement savings goals through bad times and good.

These were among the recommendations of financial professionals at a seminar in New York City on Tuesday sponsored by investment manager XA Investments. Clients can get spooked by a bad month or week in the stock market, they warned, and sometimes it compels them to junk advisors' carefully crafted retirement plans.

What should a financial professional do for those whose risk tolerance is small?

Consider investments in a retirement plan that has little correlation with the stock market, including hedge funds, private equity, real estate and other untraditional, or alternative, investment vehicles, they said.

They complained that few target-date retirement funds have alternative investment options.

They also argued that clients saving for retirement should do more than just stocks and bonds. And they contended that, in order to make a significant difference in a portfolio, a client approaching or in retirement should have at least 10 percent of retirement funds in alternative investments. That, they said, will provide them a better long-term return, with fewer scary periods of poor performance.

David Adler, senior advisor with XA Investments, said defined contribution plans tend not to use alternative investments. However, he said, that is not true in the less popular defined benefit retirement plans. “They are all about using alternatives,” he said.

Panelists also noted that institutional investors already are using these untraditional strategies, with an average of 25 percent of portfolios using alternatives.

Adler and other panelists pointed to a study showing alternatives are an effective retirement plan option, especially in target-date funds.

New research, panelists said, should prompt advisors to reconsider traditional retirement planning.

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