A pitch for alternative investments with Alto

This interview has been edited for length and clarity.

The Financial Revolutionist: What is Alto?

Eric Satz: Alto’s mission is to unlock access to alternatives for all. The purpose is to improve the lives of millions—hopefully tens of millions—of people by providing a path to financial self-sustainability and independence.

Come 2050, we’re going to have tens of millions of “retirement age” individuals who will be living in poverty if we don't do something different. We have to find our way to alternative assets and true portfolio diversification, which reduce overall volatility and give us the potential for increased returns.

How do you define alternative assets?

Anything that's a non-registered, non-publicly-traded security. To be more direct: it's real estate, private equity, venture capital, direct company investments, private credit opportunities, funds, artwork, security, securitized collectibles, crypto, farmlands, cattle, and more. So long as the IRS has approved it—which for the most part the IRS has approved, except for collectibles, which is why I say securitized collectibles—you can turn them into securities, and you can invest in them with your IRA. 

You mentioned the IRS, but the SEC is a big player here, too. How do things like BlockFi’s settlement with the regulator affect your day-to-day operations?

I put crypto in a different category, because the other way that you can talk about alternative assets is as illiquid assets. And crypto is not illiquid, it’s almost the most liquid asset we've ever encountered, which is exciting in a different way. I've had enough conversations with Gensler’s predecessor, Jay Clayton, to say that I think Jay got it right, and that the most important crypto assets are not securities. 

It seems like basically every asset save for real estate has declined in value this year. Major cryptocurrencies are at a mere fraction of their peak value. How do you pitch alternative assets given their subpar 2022 track record?

If you're 30 years old, alternative asset valuations from 2021 to 2022 don’t matter. That's the thing about retirement funds and alternative assets: They’re what we call duration matching. They're long term investments, and you're using long-term investable dollars to make those investments. 

You eliminate the option of “go” by investing in alternative assets, because you don't get to wake up and say, “You know what, I'm scared because it's already fallen 20% and I don't want it to fall 30%.” It's really hard for most of us to say, “I know it's down 20%, but three years from now, it's going to be up 10%, and so I'm not going to do anything.” You actually get to protect investors from themselves by investing in long-term alternative assets.

How does that translate to the kinds of marketing that you execute? Do you expand on the terms investors need to follow to make their investments a success?

There’s irony in all of this if you tie it back to Congress and ERISA and the IRS, because they say retirement investors shouldn’t be invested in these vehicles because they can’t get out of them and can’t get liquid. Well, we shouldn't be getting out of them; we shouldn't be getting liquid. We should be waiting.

It just goes to show just how much Congress actually knows what it’s talking about when it comes to this subject. I don't think we’ve gotten to that point yet. 

Speaking of ERISA and Congress, what sorts of compliance constraints do you currently face?

It's about making sure that people who are investing their IRA are doing so properly, which for the most part means you can’t invest in yourself, and in your immediate family members. We have an automated way of checking for that. We're a trust company and we're a custodian, but we're also a platform that enables connections between buyer and seller—we're the transaction engine if you will, but we're not judge or jury. 

We're not a broker-dealer, but that’ll change early next year when we secure our broker-dealer license. The initial focus will be to accredited investors, working with them to build some muscle memory, and then we’ll extend to the everyday retail investor.