speaker-0: Welcome to Big Mike Fun Podcast by Mike Slotnik.
speaker-1: Welcome to the Big Mike Fun Podcast. I'm the big Mike, Mike Zlatnik, and today it is my pleasure and a privilege to welcome Adam Bergman. Thanks for coming on our podcast. Adam is a founder and CEO of ⁓ IRA custodian, IRA Financial dot com. So let me just quickly jump to the quick intro formal introduction. So he's a tax attorney, entrepreneur, and leading experts in self directed retirement planning.
speaker-0: How you doing? Thanks for having me.
speaker-1: He's a founder of IRA Financial. The firm specializes in self directed retirement accounts, allows individual small businesses to invest in any asset that IRS allows. He founded IRA Financial in twenty ten to address limitations of traditional retirement. I'll jump to the ⁓ conclusion. Twenty six thousand clients, nation and seven billion assets under administration or or under custody. That's that's actually pretty significant. I don't know how how big is ⁓ I re financial relative to ⁓ equity trust or some other big
speaker-0: Yeah, we're probably like Equity Trust is bigger. They've been around since the early eighties. So they got a little bit of time on us, but we're top three to top four in the whole country. but ⁓ I think obviously there's a lot of reasons why I built Ira Financial just ⁓ with my experience as a tax lawyer and kind of how the industry has changed and how we're using technology and innovation to really change the way people invest.
speaker-1: How are you better?
speaker-0: Very easy. So not only do we have better expertise and flat fee pricing, which is very important, but we're the only company in America where you can buy stocks with your IRA, you can buy cryptos with your IRA, and you can also do alternative assets like real estate private businesses, gold, hedge funds, private credit, all in one platform for all one low fee. So The the issue is there's a lot of self-recked IRA custodians and there's some great companies out there, but they're not gonna let you buy equities, ETFs, mutual funds on their platform. You're gonna have to go to a Schwab or Fidelity and you're gonna have to pay multiple fees and have multiple accounts. What IRA Financial solves is we're the only platform where you need one IRA for all your investment needs, whether it's traditional or alternative, for one low flat fee.
speaker-1: That's actually very powerful. And I I I can attest ⁓ use a different custodian, ⁓ a couple of custodians, and yes, you you you want to open a trading account, they'll open a trading account with one of these brokerage houses, but you get charge pretty steep fees for all that. So that's true. And then crypto is another or Bitcoin to be specific. ⁓ a lot of people have actually stepped away. Some stepped in and some stepp stepped away. They jumped at the beginning to offer and then they stepped away. ⁓ so the fact that you offer both ⁓ publicly traded securities and crypto is actually an advantage. And then if it's a flat fee, if you're not charging extra, that's that's remarkable.
speaker-0: And so just on let me just jump in on that, Mike. So or double click on it. We have no commissions on our equities, mutual funds. That's through our partnership with Interactive Brokers. So you could open an account with IRA Financial. It's ⁓ a flat fee generally it's it's under five hundred bucks a year, flat. So if you have 50K or five million, you're gonna pay five hundred bucks. That includes cryptos. ⁓ there are there is a trading fee, but if you hold it, there's no annual fee. And you can trade equities, mutual funds, ETFs, options, no fees.
speaker-1: Wow, that's amazing. Interactive Brokers is one of the the best, lowest commission ⁓ shops.
speaker-0: Right. So we're trying to w why I started this company is it it made no sense. I was a tax layer in New York City and I had no idea that you can use your IRA to invest in alternative assets. I had a client that wanted to use his IRA to invest in a hedge fund. I got asked to do the research back in two thousand eight and I was just blown away that you can do this. I'd never heard of a self dragon IRA in my life, and I figured, hey, I'm a pretty educated guy, maybe not so smart, but definitely educated. And ⁓ I've never heard of this thing. This is something I would want to do. 'Cause there was a real estate deal I was looking to do that I wish I could have used my IRA. I just didn't even know it was an option. So started doing research in the industry. It was like very ⁓ you know, archaic, just dinosaur like, high fees. I quit my job and it took me about a year to c put everything together. Started IRA Financial in 2010. You know, fast forward, now we have over close to thirty thousand accounts now and over almost seven point five billion in assets. And It's taken me almost fifteen years to get to the point to have a platform that's like frictionless. Whereas you said, Mike, you can have equities, real estate, cryptos, all one platform, one flat fee, just one account, which is what Congress envisioned when they set up IRAs in nineteen seventy four.
speaker-1: Yeah, it's actually very powerful in helping folks ⁓ to diversify. The biggest issue that alternative custodians have is the Wall Street is a million pound gorilla and they they just control it and they don't want to lose the AUM. And ⁓ by moving to self directed and to ⁓ using, you know, IBKR as an example direct brokers, ⁓ you can still do stocks, just just give you the flexibility. One day you wake up and you realize the market is is too fluffy, it's overpriced, overvalued, and you may want to move quickly into some alternatives. Yeah.
speaker-0: And on top of that, like the biggest leakage. So one of the biggest issues that that people don't understand are fees. So if you're paying one percent of your assets under management, and since your retirement account is an is account you're gonna have for twenty to forty years, right, because you're really not able to touch it till fifty-nine and a half, and a lot of folks won't touch it till they have to take required minimum distributions at age seventy-three. So that's that's a long-term account. And if you're leaking out one percent a year and you're Account's gonna double every eight or nine years, assuming a ⁓ rule of seventy-two, nine percent rate of return, your money doubles every eight years, the fees are gonna keep doubling off. So if you start with a hundred K in eight years, you're gonna have two hundred K, eight more years you're gonna have four hundred K, and that one percent keeps compounding out, and you're gonna lose not thousands, but hundreds of thousands of dollars over the lifetime of the account. And that's something that just kills me.
speaker-1: Well, yeah, it's that's the the manage the the wealth manager model of one percent versus can you self-direct and can you ⁓ make the same decisions? ⁓ I mean stock market good old ⁓ Bogle, right? ⁓ Vanguard. You could you could go you could just just buy those funds and and let them ⁓ give you the return at low cost. ⁓ but the the alternative ⁓ transactions, real estate ⁓ in other alts, ⁓ they're fe fee sensitive. I'm just I'm just curious. So you have one admin fee. You charge I guess I assume you charge some kind of per transaction fee. If somebody wants to invest in a private equity fund, real estate fund or make a loan, you still charge some kind of ⁓ fee. Or maybe not, maybe I'm
speaker-0: No, there's a f there's a wire fee, but we don't charge per transaction fee. So if you have an IRA with us and you're doing multiple transactions, so much of it's automated now, Mike. So much is technology, we're able to remove the heavy burden of cost. So no, you're not gonna pay more. We're not charging you a transaction fee. You can have one IRA with us with fifteen investments in it. You're gonna pay under five hundred bucks a year.
speaker-1: That's remarkable. ⁓ honestly, I'm I'm just obser he hearing this I know I'm paying my custodian way more than that for a year and I'm not even transacting. Yeah. So yeah, that's that's a remarkable fee. Five hundred bucks or less a year ⁓ for a lo that that's remarkable, and ⁓ honestly my observation.
speaker-0: Me that that's just I I I had ⁓ had a a coffee with ⁓ a friend a few days ago and he I was going through all this and he's like, Adam, how do you make any money? And I was like, Listen, you don't chase the money. Ultimately I want to build this business client by client and keep my clients with me for as long as possible. And I think based off my belief, you do the right thing by client, clients aren't stupid. They understand value and I think that's how we built our business, just giving great service, great expertise. We have An annual consulting compliance tax reporting system where not only we'll set up your IRA, but we'll follow your tax returns, we'll file 1099s, anything related to your IRA, even corporate tax returns relating to investment partnerships or C Corps, we'll do that ⁓ for you. There is a annual compliance fee on top of that ⁓ you know, $500 fee, but it's optional. It's something you know most of our clients do because they want the added compliance shield and the support. kind of need as as an insurance wrapper on the whole structure.
speaker-1: Well, that's very interesting. That's that's really added value. ⁓ and and you're doing it low cost. Yeah. Let me ask you this tough question. Yeah. So this is what I heard. That the custodians, most of their money is made on the float, on the cash that's sitting in the accounts, earning interest for the custodian. Maybe it's it maybe it's not the case, but I heard that that maybe it's a misperception.
speaker-0: It's a misperception. It depends how big your custodian is. For us, it's it's a small number because our our accounts ⁓ are quite large. ⁓ but if you look at Schwab, a lot of people don't realize this. If you look at Schwab and you can chat GPT this, 49% of their profit is tied into the float, right? So it's not it's not the alternative because custodians that are making all this money on float. It's the Schwabs, it's the fidelities that are making most of their money on the cash you hold with them. So for us, we since we're charging a fee. it's quite low the percentage of our ⁓ profits and revenues tied to the float. ⁓ but for the the big institutions, the brokerage firms, it's much, much more significant.
speaker-1: Yeah, and I was gonna say, so some some of them pay you a money market rate, like Fidelity automatically puts your money in a ⁓ money market rate ⁓ fund, ⁓ but some of them don't. ⁓ big banks. You will have ⁓ money in your in your account and because their interest rates is almost zero or not none. Yeah. So what other innovations be be besides that you offer investors? And why should people actually take you know fight their complacency? How do you get them to move today? The stock market has been doing really well. They're just so trained. It it's the complacency and they're used to working with their advisors. It it you're fighting that ahead of anything else. That's probably the old school of business and what they're used to, and people are not comfortable and they need to build no like and trust. How do they know you, you know, you're a trusted party?
speaker-0: Well, right. So number one, I'll I'll tackle the last question first. So we're regulated trust company, right? So our cash, we partner with Capital One, UBS, Walls Fargo. So the the money sits at at ⁓ large banks where you have FDIC insurance. And then once you make your investment, obviously, it then then that's where the money's allocated. So that's number one. Number two, you're right. Our our biggest challenge, our our the headwinds we face is education. Most people don't know you can do this. ⁓ once they know they can do this, people are smart. ⁓ people are a lot smarter than I think ⁓ we get credit for. And people, most Americans, there's sixty five million IRAs, there's around nineteen trillion dollars in IRAs. There's about a trillion dollars a year that moves from 401k to IRAs. So most of Americans' liquidity are in retirement accounts, which which is good. That's where you want to save because of the compound and returns and the tax benefits. So people have liquidity there. And that's where they kind of look to pool some of that money if they want to do investments like real estate or Gold or Bitcoin or private business stocks. And I think a lot of ⁓ Americans have ⁓ wisened up to say, hey, if I just stay in the markets, I may do well. But if you look at endowments, pension funds, really wealthy people, they're making most of their money from alternative assets, from private investment funds, from private business stock, from real estate. And I think most more and more Americans are understanding that and want to get diversified because you can talk to a lot of investors and they say, All my money's tied in the SP 500, and they know that it's not really 500 stocks, it's seven companies that make up 35 to 40 percent of the profit of the SP 500. So all of us were not well diversified. So God forbid there's an AI crash. It's gonna hurt all of us because we're all integrated into the SP 500 and really seven stocks. So the smart investors and the the the really wealthy and larger ones are better diversified. family offices and that's why they're gonna be better protected.
speaker-1: Yeah, I agree a hundred percent. It's it's a Ray Dalio's theory, ten to twelve, maybe fifteen non correlated investments and and mostly ⁓ different types of alternatives. You could have some gold, you could have some real estate, you could have some energy. And you are a hundred percent correct that ⁓ this this heavy concentration only there is, but it's also grown a lot because the market is appreciated a lot. That's right. So
speaker-0: Exactly right. And I always tell people listen, I'm talking retirement accounts here. Now, you should take advantage of this liquidity premium, right? The concept that you should get higher returns if your money's tied up, i.e., in private equity or a hedge fund or a venture capital fund. So why not do in a retirement account when you can't touch that money anyways, right? Can't use it to pay a medical bill, God forbid, or to pay for your mortgage. So take advantage of. Try to get that alpha in a retirement account in a tax efficient way when the money's locked up anyways. You shouldn't be day trading in your IRA. You could for a percentage of it, but the big bulk of it, and I think fifty to sixty percent should be in alts in a retirement account because you're investing long term.
speaker-1: Yeah, agreed a hundred percent. And then there's one more element which people can do out of a stock market. I've talked quite a bit about it and just kind of immediately reminds what alternatives can offer versus ⁓ stock market. Dividend yield S P five hundred is remarkably low. What is it, one point two percent? You can get a yield. And even quality bonds, your yield is pretty low. You go into ⁓ real estate, you can get double digit yield and private credit, ⁓ or hard money lending or similar funds, you can get seven, eight percent yield on industrial assets or retail or some other strategies and appreciation in the mid teens. And the only way you can do this is in alternatives. You can't do it in in in stocks. So I had a conversation on this. It's funny you mentioned this. I was at a conference ⁓ yesterday and I had a conversation on exactly this discussion. And this investor was talking to me, Well, what if I can get the the alpha in alternatives but I lose liquidity from from moving with the cash from publicly traded securities into alternatives. So why am I doing this if I don't have the alpha? Well, for one, you can get the alpha by being very selective into what deals. So you can make the money on the buy in real estate. You just have to get very, very comfortable who you're investing with and what and what projects. That's the that's that can generate alpha. And then the second thing is cash flow. You cannot get the cash flow out of the stock market if you try and you can turn blue unless I don't I'm not even sure. Maybe some utility companies you get some yield. It's just not even co there's no comparison between well selected, income oriented private real estate versus publicly traded. The REITs are trading on a much ⁓ the yield on REITs is too low.
speaker-0: Yeah, it's way too low. And and th and then the one thing people aren't thinking about because they don't we haven't historically had to deal with it at least on fifty my lifetime. I I never really encountered inflation to the last four years, five years ago. Investing the stock market, fixed income, people are understanding that the inflation's cutting into those returns. So moving into alternatives, real estate, things like that will help combat ⁓ the potential ⁓ for inflation.
speaker-1: Yeah, and for people approaching retirement, it's a little bit more of predictability. People ask the qu the question, what's the difference between stocks and private real estate? Stock market ain't predictable. It's very difficult to get predictability. It's volatile, it can do really well, it can go bull or bear, but you don't have predictability. In real estate you can achieve reasonable. It's still uncertainty in risk and all in outs, but it's just a different approach. Okay. ⁓ What's the best way for folks to reach out? Do they want to learn more about Ira? Is it Ira financial dot com? Is that that simple?
speaker-0: Simple as that, Mike.
speaker-1: Any good books, maybe you've written a book, best practices. How do people ⁓ yeah, w do you have great lit learning tools on the platform? How do people get better at this stuff? 'Cause you gotta get them off their back. First they have to learn, they have to get comfortable with the alternatives and start considering to move their money to ⁓ to the custodian. They're also other ideas, you have best practices how to convert from traditional to the rough. Just i any any thoughts on this topic? Yeah.
speaker-0: Written, believe it or not, I've written nine books on this. You can find them on Amazon. You can just Google Adam Bergman. I'm writing my tenth, which will be published hopefully in a few months, and it's actually on the new 60-40 ⁓ portfolio, which is basically explaining and educating Americans that we should all be following the Yale endowment model, Swenson model, in our IRAs, where it's not 60% equities and 40% fixed income. It's actually 60% alts and 40%. equity slash fixed income. That that's the new sixty forty. And if that's how wealthy people, endowments, pension funds, family offices are investing. And that's how more Americans should be investing if they want to beat inflation and generate high
speaker-1: That's fascinating. I haven't heard that one before. I I've heard of the sixty forty model, but six sixty percent alt. ⁓ it it's it's funny. I've asked ⁓ AI, I've asked Chat GPT, I've asked Perplexity, ⁓ question, how much should be allocated to real estate? I I'm just curious. I I I don't know what the right number.
speaker-0: Well, I personally think, ⁓ and again, it depends on your age group. Of course, if you're seventy, it may be a lower allocation than when you're in your thirties. But for me, what's worked well for me is around thirty percent has been thirty to thirty-five percent of my money has been invested in real estate. ⁓ and then I my alt bucket of like six I'm around sixty five percent in alts and I I've done really well is real estate, private business stock, hard money loans, Bitcoin gold. It was basically my five alts and real estate makes up the biggest chunk. Just because I I like a hard asset. I like that I can make money on ⁓ just cash flow and I get the appreciation. So it's like a double benefit ⁓ that that a lot of other investments don't have.
speaker-1: You know, something really interesting. I I I'm chatting with a good friend who approached me. He's a real estate guy, but he's also a Bitcoin investor. And he said, You know what's missing in Bitcoin? It doesn't cash flow. Yeah. Digital gold, that's what they call it. There's real gold. These assets are wonderful, ⁓ but they have no cash flow and real estate does. And and if you are diversifying, maybe you could have all of them on the same platform.
speaker-0: Yeah. I I again I think it goes back to what you said initially. Like you want exposure to different asset classes. If you just ignore alts and just stay in the magnificent seven, like you're not diversified and you're gonna be at at risk. So if you don't like ⁓ the thing that real estate resonates with so many people is we all understand it, right? You can touch it, right? It makes sense. You don't have to be ⁓ you don't need an MBA from Harvard to understand the the benefits of real estate. Whereas Bitcoin's a little more complex, same with maybe investing in a private business. So it's just a much easier asset. And I I think the hedge against inflation is huge.
speaker-1: Yeah, it's kind of interesting. And they're different real estate and different parts that had ch inflation differently. We we've seen this in this cycle. Certain parts do really, really well and and some other ones don't do as well. Anyway, ⁓ appreciate you coming on the podcast. Any final thoughts? ⁓ you mentioned a book. ⁓ any other books besides the books you've written? ⁓ what kind of gets you going every morning? Is there a recent book ⁓ that you've read that just kind of ⁓
speaker-0: Just curious. Yeah, you know, I actually read ⁓ every year I I I read the Walter Isaacson biography on Steve Jobs, ⁓ because it it really inspires me. ⁓ just the the creative thinking and his ⁓ his meticulous ⁓ you know focus on details ⁓ and j just thinking about what a consumer wants. So every year I reread that book ⁓ because ⁓ Steve Jobs just fascinates me.
speaker-1: The truth is it's not the quant the the breadth of the how many books or the quantity, it's the depth, right? It's the same book that you read again and again and again. And ⁓ I I've been rereading ⁓ lately quite a bit of Howard Marks. He's just one of the greatest. And some sometimes going back to these greats, including Charlie Monger, ⁓ thinking about invert, always invert, how can you lose money? And most people today in the market they don't think about it. They just think how to catch the wave, AI wave. But the danger zone, I remember dot com days. It can be a correction and it will be.
speaker-0: It's not ca it's gonna happen. Of course, right? It's just ⁓ that's the market and that's okay. I mean, w it should go down. It has to go down and we'll go up again. And I'm not saying never buy equities, but it's like what we're discussing today. You need to be diversified, you need to be balanced. That's how you're gonna get richer.
speaker-1: But I really love your concept of sixty percent alts. I mean that's a very powerful idea. That is an innovative idea for sure. And depending who you talk to, but traditional advisors of course will will you're being contrarian in some ways.
speaker-0: Some ways. I think the good ones I I think the good ones understand that that benefit. I think the really good advisors that really care about their clients are starting to understand the power of alts and are pushing them, maybe into publicly traded REITs, for example, for exposure to real estate. ⁓ but I've been lately ⁓ even my advisors warming up to Bitcoin, ⁓ definitely private credit funds, private equity, ⁓ hedge funds, venture capital funds, things that seven, eight years ago they would have told me not to do.
speaker-1: comes down to education. ⁓ and and if they work for a big ⁓ wealth management firm and they have corporate the direction or they they they have the flexibility to do what's right for the client versus ⁓ what the corporate tells them. Exactly. Thank you for coming on a podcast. Appreciate your wisdom and appreciate your sharing. And I was delighted to learn a lot about IRA financial and how you're better and different. So thank you. You too.
speaker-0: Thank you. Have a great day. Thank you.
speaker-1: Welcome to the Big Mike Fun Podcast. I'm the big Mike, Mike Zlatnik, and today it is my pleasure and a privilege to welcome Adam Bergman. Thanks for coming on our podcast. Adam is a founder and CEO of ⁓ IRA custodian, IRA Financial dot com. So let me just quickly jump to the quick intro formal introduction. So he's a tax attorney, entrepreneur, and leading experts in self directed retirement planning.
speaker-0: How you doing? Thanks for having me.
speaker-1: He's a founder of IRA Financial. The firm specializes in self directed retirement accounts, allows individual small businesses to invest in any asset that IRS allows. He founded IRA Financial in twenty ten to address limitations of traditional retirement. I'll jump to the ⁓ conclusion. Twenty six thousand clients, nation and seven billion assets under administration or or under custody. That's that's actually pretty significant. I don't know how how big is ⁓ I re financial relative to ⁓ equity trust or some other big
speaker-0: Yeah, we're probably like Equity Trust is bigger. They've been around since the early eighties. So they got a little bit of time on us, but we're top three to top four in the whole country. but ⁓ I think obviously there's a lot of reasons why I built Ira Financial just ⁓ with my experience as a tax lawyer and kind of how the industry has changed and how we're using technology and innovation to really change the way people invest.
speaker-1: How are you better?
speaker-0: Very easy. So not only do we have better expertise and flat fee pricing, which is very important, but we're the only company in America where you can buy stocks with your IRA, you can buy cryptos with your IRA, and you can also do alternative assets like real estate private businesses, gold, hedge funds, private credit, all in one platform for all one low fee. So The the issue is there's a lot of self-recked IRA custodians and there's some great companies out there, but they're not gonna let you buy equities, ETFs, mutual funds on their platform. You're gonna have to go to a Schwab or Fidelity and you're gonna have to pay multiple fees and have multiple accounts. What IRA Financial solves is we're the only platform where you need one IRA for all your investment needs, whether it's traditional or alternative, for one low flat fee.
speaker-1: That's actually very powerful. And I I I can attest ⁓ use a different custodian, ⁓ a couple of custodians, and yes, you you you want to open a trading account, they'll open a trading account with one of these brokerage houses, but you get charge pretty steep fees for all that. So that's true. And then crypto is another or Bitcoin to be specific. ⁓ a lot of people have actually stepped away. Some stepped in and some stepp stepped away. They jumped at the beginning to offer and then they stepped away. ⁓ so the fact that you offer both ⁓ publicly traded securities and crypto is actually an advantage. And then if it's a flat fee, if you're not charging extra, that's that's remarkable.
speaker-0: And so just on let me just jump in on that, Mike. So or double click on it. We have no commissions on our equities, mutual funds. That's through our partnership with Interactive Brokers. So you could open an account with IRA Financial. It's ⁓ a flat fee generally it's it's under five hundred bucks a year, flat. So if you have 50K or five million, you're gonna pay five hundred bucks. That includes cryptos. ⁓ there are there is a trading fee, but if you hold it, there's no annual fee. And you can trade equities, mutual funds, ETFs, options, no fees.
speaker-1: Wow, that's amazing. Interactive Brokers is one of the the best, lowest commission ⁓ shops.
speaker-0: Right. So we're trying to w why I started this company is it it made no sense. I was a tax layer in New York City and I had no idea that you can use your IRA to invest in alternative assets. I had a client that wanted to use his IRA to invest in a hedge fund. I got asked to do the research back in two thousand eight and I was just blown away that you can do this. I'd never heard of a self dragon IRA in my life, and I figured, hey, I'm a pretty educated guy, maybe not so smart, but definitely educated. And ⁓ I've never heard of this thing. This is something I would want to do. 'Cause there was a real estate deal I was looking to do that I wish I could have used my IRA. I just didn't even know it was an option. So started doing research in the industry. It was like very ⁓ you know, archaic, just dinosaur like, high fees. I quit my job and it took me about a year to c put everything together. Started IRA Financial in 2010. You know, fast forward, now we have over close to thirty thousand accounts now and over almost seven point five billion in assets. And It's taken me almost fifteen years to get to the point to have a platform that's like frictionless. Whereas you said, Mike, you can have equities, real estate, cryptos, all one platform, one flat fee, just one account, which is what Congress envisioned when they set up IRAs in nineteen seventy four.
speaker-1: Yeah, it's actually very powerful in helping folks ⁓ to diversify. The biggest issue that alternative custodians have is the Wall Street is a million pound gorilla and they they just control it and they don't want to lose the AUM. And ⁓ by moving to self directed and to ⁓ using, you know, IBKR as an example direct brokers, ⁓ you can still do stocks, just just give you the flexibility. One day you wake up and you realize the market is is too fluffy, it's overpriced, overvalued, and you may want to move quickly into some alternatives. Yeah.
speaker-0: And on top of that, like the biggest leakage. So one of the biggest issues that that people don't understand are fees. So if you're paying one percent of your assets under management, and since your retirement account is an is account you're gonna have for twenty to forty years, right, because you're really not able to touch it till fifty-nine and a half, and a lot of folks won't touch it till they have to take required minimum distributions at age seventy-three. So that's that's a long-term account. And if you're leaking out one percent a year and you're Account's gonna double every eight or nine years, assuming a ⁓ rule of seventy-two, nine percent rate of return, your money doubles every eight years, the fees are gonna keep doubling off. So if you start with a hundred K in eight years, you're gonna have two hundred K, eight more years you're gonna have four hundred K, and that one percent keeps compounding out, and you're gonna lose not thousands, but hundreds of thousands of dollars over the lifetime of the account. And that's something that just kills me.
speaker-1: Well, yeah, it's that's the the manage the the wealth manager model of one percent versus can you self-direct and can you ⁓ make the same decisions? ⁓ I mean stock market good old ⁓ Bogle, right? ⁓ Vanguard. You could you could go you could just just buy those funds and and let them ⁓ give you the return at low cost. ⁓ but the the alternative ⁓ transactions, real estate ⁓ in other alts, ⁓ they're fe fee sensitive. I'm just I'm just curious. So you have one admin fee. You charge I guess I assume you charge some kind of per transaction fee. If somebody wants to invest in a private equity fund, real estate fund or make a loan, you still charge some kind of ⁓ fee. Or maybe not, maybe I'm
speaker-0: No, there's a f there's a wire fee, but we don't charge per transaction fee. So if you have an IRA with us and you're doing multiple transactions, so much of it's automated now, Mike. So much is technology, we're able to remove the heavy burden of cost. So no, you're not gonna pay more. We're not charging you a transaction fee. You can have one IRA with us with fifteen investments in it. You're gonna pay under five hundred bucks a year.
speaker-1: That's remarkable. ⁓ honestly, I'm I'm just obser he hearing this I know I'm paying my custodian way more than that for a year and I'm not even transacting. Yeah. So yeah, that's that's a remarkable fee. Five hundred bucks or less a year ⁓ for a lo that that's remarkable, and ⁓ honestly my observation.
speaker-0: Me that that's just I I I had ⁓ had a a coffee with ⁓ a friend a few days ago and he I was going through all this and he's like, Adam, how do you make any money? And I was like, Listen, you don't chase the money. Ultimately I want to build this business client by client and keep my clients with me for as long as possible. And I think based off my belief, you do the right thing by client, clients aren't stupid. They understand value and I think that's how we built our business, just giving great service, great expertise. We have An annual consulting compliance tax reporting system where not only we'll set up your IRA, but we'll follow your tax returns, we'll file 1099s, anything related to your IRA, even corporate tax returns relating to investment partnerships or C Corps, we'll do that ⁓ for you. There is a annual compliance fee on top of that ⁓ you know, $500 fee, but it's optional. It's something you know most of our clients do because they want the added compliance shield and the support. kind of need as as an insurance wrapper on the whole structure.
speaker-1: Well, that's very interesting. That's that's really added value. ⁓ and and you're doing it low cost. Yeah. Let me ask you this tough question. Yeah. So this is what I heard. That the custodians, most of their money is made on the float, on the cash that's sitting in the accounts, earning interest for the custodian. Maybe it's it maybe it's not the case, but I heard that that maybe it's a misperception.
speaker-0: It's a misperception. It depends how big your custodian is. For us, it's it's a small number because our our accounts ⁓ are quite large. ⁓ but if you look at Schwab, a lot of people don't realize this. If you look at Schwab and you can chat GPT this, 49% of their profit is tied into the float, right? So it's not it's not the alternative because custodians that are making all this money on float. It's the Schwabs, it's the fidelities that are making most of their money on the cash you hold with them. So for us, we since we're charging a fee. it's quite low the percentage of our ⁓ profits and revenues tied to the float. ⁓ but for the the big institutions, the brokerage firms, it's much, much more significant.
speaker-1: Yeah, and I was gonna say, so some some of them pay you a money market rate, like Fidelity automatically puts your money in a ⁓ money market rate ⁓ fund, ⁓ but some of them don't. ⁓ big banks. You will have ⁓ money in your in your account and because their interest rates is almost zero or not none. Yeah. So what other innovations be be besides that you offer investors? And why should people actually take you know fight their complacency? How do you get them to move today? The stock market has been doing really well. They're just so trained. It it's the complacency and they're used to working with their advisors. It it you're fighting that ahead of anything else. That's probably the old school of business and what they're used to, and people are not comfortable and they need to build no like and trust. How do they know you, you know, you're a trusted party?
speaker-0: Well, right. So number one, I'll I'll tackle the last question first. So we're regulated trust company, right? So our cash, we partner with Capital One, UBS, Walls Fargo. So the the money sits at at ⁓ large banks where you have FDIC insurance. And then once you make your investment, obviously, it then then that's where the money's allocated. So that's number one. Number two, you're right. Our our biggest challenge, our our the headwinds we face is education. Most people don't know you can do this. ⁓ once they know they can do this, people are smart. ⁓ people are a lot smarter than I think ⁓ we get credit for. And people, most Americans, there's sixty five million IRAs, there's around nineteen trillion dollars in IRAs. There's about a trillion dollars a year that moves from 401k to IRAs. So most of Americans' liquidity are in retirement accounts, which which is good. That's where you want to save because of the compound and returns and the tax benefits. So people have liquidity there. And that's where they kind of look to pool some of that money if they want to do investments like real estate or Gold or Bitcoin or private business stocks. And I think a lot of ⁓ Americans have ⁓ wisened up to say, hey, if I just stay in the markets, I may do well. But if you look at endowments, pension funds, really wealthy people, they're making most of their money from alternative assets, from private investment funds, from private business stock, from real estate. And I think most more and more Americans are understanding that and want to get diversified because you can talk to a lot of investors and they say, All my money's tied in the SP 500, and they know that it's not really 500 stocks, it's seven companies that make up 35 to 40 percent of the profit of the SP 500. So all of us were not well diversified. So God forbid there's an AI crash. It's gonna hurt all of us because we're all integrated into the SP 500 and really seven stocks. So the smart investors and the the the really wealthy and larger ones are better diversified. family offices and that's why they're gonna be better protected.
speaker-1: Yeah, I agree a hundred percent. It's it's a Ray Dalio's theory, ten to twelve, maybe fifteen non correlated investments and and mostly ⁓ different types of alternatives. You could have some gold, you could have some real estate, you could have some energy. And you are a hundred percent correct that ⁓ this this heavy concentration only there is, but it's also grown a lot because the market is appreciated a lot. That's right. So
speaker-0: Exactly right. And I always tell people listen, I'm talking retirement accounts here. Now, you should take advantage of this liquidity premium, right? The concept that you should get higher returns if your money's tied up, i.e., in private equity or a hedge fund or a venture capital fund. So why not do in a retirement account when you can't touch that money anyways, right? Can't use it to pay a medical bill, God forbid, or to pay for your mortgage. So take advantage of. Try to get that alpha in a retirement account in a tax efficient way when the money's locked up anyways. You shouldn't be day trading in your IRA. You could for a percentage of it, but the big bulk of it, and I think fifty to sixty percent should be in alts in a retirement account because you're investing long term.
speaker-1: Yeah, agreed a hundred percent. And then there's one more element which people can do out of a stock market. I've talked quite a bit about it and just kind of immediately reminds what alternatives can offer versus ⁓ stock market. Dividend yield S P five hundred is remarkably low. What is it, one point two percent? You can get a yield. And even quality bonds, your yield is pretty low. You go into ⁓ real estate, you can get double digit yield and private credit, ⁓ or hard money lending or similar funds, you can get seven, eight percent yield on industrial assets or retail or some other strategies and appreciation in the mid teens. And the only way you can do this is in alternatives. You can't do it in in in stocks. So I had a conversation on this. It's funny you mentioned this. I was at a conference ⁓ yesterday and I had a conversation on exactly this discussion. And this investor was talking to me, Well, what if I can get the the alpha in alternatives but I lose liquidity from from moving with the cash from publicly traded securities into alternatives. So why am I doing this if I don't have the alpha? Well, for one, you can get the alpha by being very selective into what deals. So you can make the money on the buy in real estate. You just have to get very, very comfortable who you're investing with and what and what projects. That's the that's that can generate alpha. And then the second thing is cash flow. You cannot get the cash flow out of the stock market if you try and you can turn blue unless I don't I'm not even sure. Maybe some utility companies you get some yield. It's just not even co there's no comparison between well selected, income oriented private real estate versus publicly traded. The REITs are trading on a much ⁓ the yield on REITs is too low.
speaker-0: Yeah, it's way too low. And and th and then the one thing people aren't thinking about because they don't we haven't historically had to deal with it at least on fifty my lifetime. I I never really encountered inflation to the last four years, five years ago. Investing the stock market, fixed income, people are understanding that the inflation's cutting into those returns. So moving into alternatives, real estate, things like that will help combat ⁓ the potential ⁓ for inflation.
speaker-1: Yeah, and for people approaching retirement, it's a little bit more of predictability. People ask the qu the question, what's the difference between stocks and private real estate? Stock market ain't predictable. It's very difficult to get predictability. It's volatile, it can do really well, it can go bull or bear, but you don't have predictability. In real estate you can achieve reasonable. It's still uncertainty in risk and all in outs, but it's just a different approach. Okay. ⁓ What's the best way for folks to reach out? Do they want to learn more about Ira? Is it Ira financial dot com? Is that that simple?
speaker-0: Simple as that, Mike.
speaker-1: Any good books, maybe you've written a book, best practices. How do people ⁓ yeah, w do you have great lit learning tools on the platform? How do people get better at this stuff? 'Cause you gotta get them off their back. First they have to learn, they have to get comfortable with the alternatives and start considering to move their money to ⁓ to the custodian. They're also other ideas, you have best practices how to convert from traditional to the rough. Just i any any thoughts on this topic? Yeah.
speaker-0: Written, believe it or not, I've written nine books on this. You can find them on Amazon. You can just Google Adam Bergman. I'm writing my tenth, which will be published hopefully in a few months, and it's actually on the new 60-40 ⁓ portfolio, which is basically explaining and educating Americans that we should all be following the Yale endowment model, Swenson model, in our IRAs, where it's not 60% equities and 40% fixed income. It's actually 60% alts and 40%. equity slash fixed income. That that's the new sixty forty. And if that's how wealthy people, endowments, pension funds, family offices are investing. And that's how more Americans should be investing if they want to beat inflation and generate high
speaker-1: That's fascinating. I haven't heard that one before. I I've heard of the sixty forty model, but six sixty percent alt. ⁓ it it's it's funny. I've asked ⁓ AI, I've asked Chat GPT, I've asked Perplexity, ⁓ question, how much should be allocated to real estate? I I'm just curious. I I I don't know what the right number.
speaker-0: Well, I personally think, ⁓ and again, it depends on your age group. Of course, if you're seventy, it may be a lower allocation than when you're in your thirties. But for me, what's worked well for me is around thirty percent has been thirty to thirty-five percent of my money has been invested in real estate. ⁓ and then I my alt bucket of like six I'm around sixty five percent in alts and I I've done really well is real estate, private business stock, hard money loans, Bitcoin gold. It was basically my five alts and real estate makes up the biggest chunk. Just because I I like a hard asset. I like that I can make money on ⁓ just cash flow and I get the appreciation. So it's like a double benefit ⁓ that that a lot of other investments don't have.
speaker-1: You know, something really interesting. I I I'm chatting with a good friend who approached me. He's a real estate guy, but he's also a Bitcoin investor. And he said, You know what's missing in Bitcoin? It doesn't cash flow. Yeah. Digital gold, that's what they call it. There's real gold. These assets are wonderful, ⁓ but they have no cash flow and real estate does. And and if you are diversifying, maybe you could have all of them on the same platform.
speaker-0: Yeah. I I again I think it goes back to what you said initially. Like you want exposure to different asset classes. If you just ignore alts and just stay in the magnificent seven, like you're not diversified and you're gonna be at at risk. So if you don't like ⁓ the thing that real estate resonates with so many people is we all understand it, right? You can touch it, right? It makes sense. You don't have to be ⁓ you don't need an MBA from Harvard to understand the the benefits of real estate. Whereas Bitcoin's a little more complex, same with maybe investing in a private business. So it's just a much easier asset. And I I think the hedge against inflation is huge.
speaker-1: Yeah, it's kind of interesting. And they're different real estate and different parts that had ch inflation differently. We we've seen this in this cycle. Certain parts do really, really well and and some other ones don't do as well. Anyway, ⁓ appreciate you coming on the podcast. Any final thoughts? ⁓ you mentioned a book. ⁓ any other books besides the books you've written? ⁓ what kind of gets you going every morning? Is there a recent book ⁓ that you've read that just kind of ⁓
speaker-0: Just curious. Yeah, you know, I actually read ⁓ every year I I I read the Walter Isaacson biography on Steve Jobs, ⁓ because it it really inspires me. ⁓ just the the creative thinking and his ⁓ his meticulous ⁓ you know focus on details ⁓ and j just thinking about what a consumer wants. So every year I reread that book ⁓ because ⁓ Steve Jobs just fascinates me.
speaker-1: The truth is it's not the quant the the breadth of the how many books or the quantity, it's the depth, right? It's the same book that you read again and again and again. And ⁓ I I've been rereading ⁓ lately quite a bit of Howard Marks. He's just one of the greatest. And some sometimes going back to these greats, including Charlie Monger, ⁓ thinking about invert, always invert, how can you lose money? And most people today in the market they don't think about it. They just think how to catch the wave, AI wave. But the danger zone, I remember dot com days. It can be a correction and it will be.
speaker-0: It's not ca it's gonna happen. Of course, right? It's just ⁓ that's the market and that's okay. I mean, w it should go down. It has to go down and we'll go up again. And I'm not saying never buy equities, but it's like what we're discussing today. You need to be diversified, you need to be balanced. That's how you're gonna get richer.
speaker-1: But I really love your concept of sixty percent alts. I mean that's a very powerful idea. That is an innovative idea for sure. And depending who you talk to, but traditional advisors of course will will you're being contrarian in some ways.
speaker-0: Some ways. I think the good ones I I think the good ones understand that that benefit. I think the really good advisors that really care about their clients are starting to understand the power of alts and are pushing them, maybe into publicly traded REITs, for example, for exposure to real estate. ⁓ but I've been lately ⁓ even my advisors warming up to Bitcoin, ⁓ definitely private credit funds, private equity, ⁓ hedge funds, venture capital funds, things that seven, eight years ago they would have told me not to do.
speaker-1: comes down to education. ⁓ and and if they work for a big ⁓ wealth management firm and they have corporate the direction or they they they have the flexibility to do what's right for the client versus ⁓ what the corporate tells them. Exactly. Thank you for coming on a podcast. Appreciate your wisdom and appreciate your sharing. And I was delighted to learn a lot about IRA financial and how you're better and different. So thank you. You too.
speaker-0: Thank you. Have a great day. Thank you.
