Reverse mortgage market has been “cleaned up,” say financial advisors. Innovative approaches to protecting retiree portfolios. CNBC Investor tool kit. Novel approaches include structured notes and no-load modified endowment contracts. No-load modified endowment contracts provide certain minimum guarantees.
Deborah Nason | @dnason
Once you’ve stopped working, what steps can be taken to protect your retirement portfolio? Financial advisors offered several innovative approaches.
Structured notes. “We have been utilizing structured notes since the financial crisis of 2008 as a ‘portfolio repair and recovery’ strategy and now as a ‘hedging solution’ for our clients’ portfolios,” said Thomas W. Balcom, certified financial planner and founder of 1650 Wealth Management.
A structured note is a debt obligation that tracks both an underlying debt obligation and a derivative (option) embedded within it.
Balcom’s firm works with major banks to develop notes designed to cap the upside and protect the downside from modest declines. By creating an in-house structured note, the firm is able to allocate assets to it for both high-net-worth and mass-affluent clients. He estimates that more than one third of his clients’ portfolios are invested in this strategy.
The notes are generally from one to three years in duration, and the firm offers a series of laddered maturities.
One advantage of this strategy is that it is allowed within an individual retirement account, Balcom said. Downsides include credit risk of the issuers and the lack of dividend income. Read more
Leave a Reply