Josh Cantwell: So, hey, guys. Welcome back. It’s your host, Josh Cantwell. Thanks for jumping on and listening and participating and being a part of the community. Today, I have a special guest on the show. His name is Andy Hagans. He is the co-founder at WealthChannel, a leading community for high-net-worth investors and advisors who placed capital in alternative investments. He’s also the host of The Alternative Investment Podcast, the number one Alts podcast reaching RIAs, family offices, and high net worth investors. He’s also the host of the WealthChannel Live Events. And that is a platform where they bring in accredited investors, high net-worth investors, and match them up with sponsors that have alternate investments. It could be private equity, it could be venture capital, it could be real estate syndications, you name it. They want to focus on alternate investments. And today, we’re going to talk about, number one, how to pick a winner, how to pick a general partner or pick a winner, pick an investment. If you invest in alternatives as a limited partner, they must, number one, have a proven track record and, number two, must be a space that they understand.

Number two, we’re going to talk about crowdfunding and how to start investing in alternative assets through crowdfunding. We’re going to talk about, number three, what’s called the illiquidity premium, the idea of earning higher returns in alternative assets because they can be illiquid like real estate, oil and gas, cannabis, crypto, private credit, things like that. And also, why financial advisors have pivoted from the traditional 60/40 diversification model to a 50/30/20 model, including alternate investments. You’re going to love this episode of Accelerated Investor with Andy Hagans, the CEO and President of WealthChannel. Here we go.

[INTERVIEW]

Josh Cantwell: So, hey, Andy. Hey, welcome to Accelerated Investor. So excited to have you on the show to talk about some alternate investment opportunities and talk about your kind of view of the marketplace based on what’s going on. So, thanks for carving out a few minutes for the show.

Andy Hagans: Very happy to be here. I love your show. I know you have a big thing going here so I’m just happy to connect with you and your audience.

Josh Cantwell: Absolutely, Andy. So, let’s talk about alternatives a little bit relative to today’s market. You know, the market’s weird. Let’s just do a quick recap. A month ago, the ten-year Treasury was up at 4, 4.2. A lot of people were saying that the cost of debt was becoming very prohibitive to be in business or to be a real estate entrepreneur to start a new company. All of a sudden today, the ten-year Treasury is down to 3.2, which is allowing the cost of debt to be more affordable, which will probably create some more transaction volume. You know, there’s all this talk now about China going in and buying and contracting in oil with Saudis and Russia and the yuan and the U.S. dollar losing value because of inflation. Your focus is alternate investments. And so, if you look at today’s market, what are you most excited about or most concerned about?

Andy Hagans: Which really you already kind of mentioned them, Josh, and they’re almost the same thing or they’re two sides of the same coin. What I’m most concerned about is financial repression. You know, you mentioned the ten-year being in the low threes now and inflation is in the six or sevens or kind of depends on who you ask if you trust the CPI or not. But investors are looking at this entire category in traditional investments, fixed income, and on an after-inflation, after-tax basis, it’s very negative. So, that’s financial repression where the earnings that you can earn in any reasonably safe fixed income are actually negative after inflation. So, what I’m most excited about is kind of the other side of that coin. So, you add in financial repression with fixed income, you add in the extreme volatility in the stock market, more and more investors are shifting into alternative investments, and that’s my wheelhouse. That’s what I’m passionate about. That’s what I’m excited about.

And honestly, family offices, institutional investors, Harvard and Yale endowments, some of the most sophisticated ultra-wealthy investors have been investing in alts for decades now. And it’s finally, to me, it’s like it’s the moment of alts when it’s finally kind of hitting the mainstream where if I could use the phrase everyday millionaires or your kind of everyday accredited investors are really embracing alts.

Josh Cantwell: So, define alts for me. What for our audience like in your mind, Andy, in what you like to invest in or talk to your investors about and you investing your own personal dollars in alts, define that for us from your perspective. What does that mean to you?

Andy Hagans: So, it’s funny, you can ask a hundred different alternatives experts, get a hundred different answers, but to me, anything besides stocks, bonds, and cash or cash-like instruments. And when I say stocks and bonds, I’m also including in there traditional wrappers, like mutual funds, index funds, ETFs that own those instruments in like a long-only fashion. So, anything besides those, to me is an alternative investment. So, everything from collectibles and commodities and precious metals to also things that are in funds, in products like private equity funds, private real estate funds, venture capital funds. And so, really my focus is more on the latter. It’s on alternative investments that yield income. I mean, perennially, I find income is popular. It’s popular with me but it’s popular with everybody, right, institutional investors, family offices. And so, to me, that’s kind of my sweet spot is alternative investments that don’t have the volatility of the public markets that yield substantial income. They tend to also have most of them have very attractive tax advantages. I know you have a lot of real estate investors in your audience. So, that’s kind of my wheelhouse, the private equity venture capital and private real estate.

Josh Cantwell: Got it. Love it. So, if you listen to Robert Kiyosaki, he’s become more and more bearish on the US economy, the dollar, and talks a lot about the same things that you’re mentioning. But he’s been that way since he’s been that way forever, right? He’s been anti-stock market looking at alternative investments. So, most people probably still a great percentage of their wealth is in the stock market, traditional stocks, bonds, mutual funds. If you’re talking to one of those people, that’s a reasonable net worth, high net worth investor but still is doing traditional things. Maybe they own a business, they’re making a couple million bucks a year personal income, they’ve built up stock account that’s worth millions and they maybe have a business of their own that they run. What’s the first step for them? Like, what is the first thing that you would talk about with someone like that to talk about alternative investments? Is it the tax advantages? Is it the risk? Is it derisking their portfolio?

And then what’s the first thing that they should look at from your perspective? Is it real estate? Is it investing in industrial real estate, multifamily real estate? Is it investing in a business like an e-commerce business that can be taken over that’s maybe being sold at a discount? So, first, let’s talk about the person that’s got most of their money in traditional investments and what first steps should they take to begin looking at alts?

Andy Hagans: Yeah, that’s a great question. And to be clear, I don’t coach people like liquidate your traditional portfolio and put it all in alternatives. I still own traditional investments but big believer in diversification. But that being said, kind of a starting point, I would say the old 60/40 portfolio, even a lot of advisors, traditional financial advisors are now talking about the 50/30/20. So, I think step one is just sort of looking at your portfolio and saying, “Well, what do I own right now? What’s my asset allocation right now and what do I want it to be?” And to your other question, what’s the primary appeal of alternatives? I mentioned income, but I really think more and more it’s capital preservation. I think a lot of investors are turning to alternative investments because they’re sick and tired of the volatility in the public markets. And so, by investing in some of these illiquid funds, people talk about there’s illiquidity risk. To me, illiquidity actually helps me sleep at night. He’s like, “Let’s take a private equity deal that I’ve done.” You know, I’m a partner in a private equity business, general partner, and limited partner. And I just own the business. And so, it cash flows and I get basically a monthly dividend. There’s no stock market that’s repricing it every single day making me nervous.

So, to me, if you think about illiquid alternative investments, is that the kind of lifestyle you want, passive income without necessarily having to check your balance every day? And some investors might say, “You know what, I don’t care if the stock market’s on this wild roller coaster. I’ll check my balance when I’m 65.” And if that’s you, like that’s fine but increasingly, I think a lot of high net worth investors, they’re interested in alts because of that capital preservation aspect, less volatility, and then those other things, income tax advantages, those are like sweeteners that make it even more appealing.

Josh Cantwell: No doubt. You mentioned that you’re in a private equity business. So, if somebody says, “Hey I want to get started in alts real estate as a limited partner or general partner. We’ve talked about that 100 times in the show, right? Then people are like, “Okay. Yeah, we know about those opportunities and we’ve raised about $100 million and we know about those.” Outside of real estate, let’s go down a different path. Describe an investment or investments maybe that you’ve done that our audience could be aware of. Maybe that exact investment is not available anymore. It’s maybe fully subscribed or sold out or you’re not raising any money for it but describe a couple of those for us. And then high level, generally, how would somebody get access to a deal like that?

Andy Hagans: Yeah. That’s a great question. And with all of these, I think with private equity or with real estate, and by the way, I mean private real estate and venture capital are really technically subsets of private equity, right? Private equity is just equity that’s private, that’s not publicly traded. But there’s a spectrum of how active do you want to be versus how passive do you want to be. And so, my personal portfolio, my personal alternative investments they’re actually across that spectrum, right? So, I have some investments where I’m just a totally passive LP, like in a private real estate fund. A couple of private equity deals that I’m involved in. One is a venture capital fund, and that’s the deal that I got access to. Just someone I knew. I knew the GP and he knew of me and we just had a relationship and actually, I think they had a pretty high minimum. But just because we had a relationship and I don’t want to say I did them a favor or anything but we’ve just helped each other kind of over the years. So, he invited me in to be an LP into that fund.

But there are other venture capital funds that they might have $100,000 minimum or $250,000, minimum, $500,000 minimum that you can just be an LP without any sort of invitation or anything like that. That’s the purely passive end of the spectrum. Probably my best deal to date in private equity was on the more active side, right? So, in the real estate world, this would be more like being a GP or being a GP/LP, or co-GP. All these terms we throw around, they kind of confuse people but basically, if you’re a GP, a general partner, you’re active in the deal, right? You’re adding value somehow, maybe you’re helping with the management. So, this was a company, a fintech company in the payments processing space, and I basically made an early investment and I also offered to help them just strategically because I’m familiar with marketing and some different ways to scale businesses because I’ve done that in the past. And so, this has just been one of those quiet, boring businesses that it’s had some little ups and downs but it’s just kind of consistently grown over five years. And I’ve never even looked at the numbers cash-on-cash but I’ve done very, very well with it.

And again, that’s an investment. I wrote a check once and then it’s almost like mentally you write off if you write a check like that into an illiquid business, you write it off. And I’ve never really had to worry about it again in the sense of like when the S&P is down by 20%, it’s like it doesn’t affect my private equity investment.

Josh Cantwell: And how did you evaluate that? Like, you got access to a friend. You said it was an early investment but what were some of the traits of that deal that you liked? Was it the way that they were going to grow? Was it that they have a unique niche in the market? Like, if I had never, let’s say I’m worth $10 million and I’ve got a million deployable liquid and I want to look at something similar, and I just don’t know about making that first investment, what are some things that you saw in that, that kind of hit your checkbox, that hit your checklist and said, “Yeah, I like it?” Tell us about that. Help our audience understand a little bit about what you think goes into a good deal like that.

Andy Hagans: That’s a great question. And I think there are fundamentals that apply to any niche, whether it’s real estate or private equity. Number one is a proven track record and a partner that you trust, right? If I’m talking about doing a deal or investing in a fund, if I don’t trust the principals, the GPs, just walk away like I don’t care what projected IRR is. It’s just if you don’t have that trust, walk away. So, this is someone that I knew and they had a proven track record. So, it’s not just a track record like in the abstract. I look for someone who has a track record in this space and that deal. So, for instance, if I’m investing in a multifamily fund, I want the GP to have a track record in multifamily, right? I don’t want to be their first rodeo as a limited partner to sort of use my cash for them to be their learning cash so track record sponsor that I trust. And then I would also say a space that I understand, right? You know, maybe I don’t understand every single nook and cranny but online for me, online marketing, fintech, recurring revenue, business models, those are things I’m very comfortable evaluating.

And so, I think if you’re in a space where it’s very hard for you to evaluate what the sponsor is doing, to me, it might be a great deal but if I can’t understand it, then I’m just not comfortable writing the check. And I think that’s why a lot of folks are attracted to real estate and even some spaces in real estate like multifamily because they’re easier to understand, there’s nothing wrong with that, by the way. Boring businesses that you understand can be fantastic businesses.

Josh Cantwell: Absolutely. The businesses and you mentioned the diversification. So, when you said 60/40, like people that have worked with an advisor or have their own portfolio of 60/40 stocks-bonds, that type of thing, then you mentioned 50/30/20. What did you mean by that?

Andy Hagans: So, 60/40 would be like 60% stocks, 40% bonds or fixed income portfolio. That’s like a traditional either retirement portfolio or institutional portfolio. That’s almost considered to be like the default portfolio in the abstract with traditional investments. So, the 50/30/20 is basically in the financial advisory space. You know, a lot of folks, their financial advisors, RIAs, financial professionals are basically saying, look, the new default portfolio has a 20% allocation to alternatives. And when they’re talking about that 20% allocation, I mean, that could really mean anything in the abstract but I think the biggest slices of that would be real estate, would be probably the biggest, you know, that’s the biggest sub-asset class within alternatives, if you want to call it that, although it’s an 800-pound gorilla but then also venture capital and private equity would be in that 20.

Josh Cantwell: Okay. Got it. Love it. So, you mentioned that you were able to get into that deal because you knew the sponsor had a relationship with them. Again, if somebody doesn’t have that yet, where can they go? What can they do to meet possible sponsors, to meet possible partners, maybe other GPs that have a deal? They’re going to do a raise and give up some equity and they’re going to the next level. I’m partially asking for my audience and partially asking for me because I’m always looking for the next thing, right? And I’ve got a big piece of my personal net worth is in real estate in our 4,000 units of apartments. You can do the math. It’s pretty big. But we’ve done some things even within, like you mentioned, spaces that I understand. For example, we started a laundry business, right? So, buying the laundry machines that we could put into our apartment buildings and other people’s apartment buildings without giving away too much you can buy a set of laundry. Give you an idea, washer and dryer for about $1,500 apiece. It’s about $3,000, right?

If you buy that and put it in a garden-style apartment, let’s say there’s between 12 and 18 units in that garden-style apartment, let’s say 15, to use a round number, that washer dryer should make about $20 to $25 per month per unit. So, 15 units times $20 a month, it’s not a ton but it’s $300 a month in income. They’re brand-new washers and dryers that have zero expenses because they’re brand new. Very little maintenance, very little overhead. And I can essentially make back the entire purchase of the washer and dryer in year one. That’s a boring cashflow play and there’s huge companies, Laundry One and CSC, and these other companies that have been in the space. But as they’ve gotten huge and CSC is a billion-dollar company, their customer service with their owners, the apartment owners has gotten horrible. And so, a simple play there, that would be like a private equity type of play where a guy like me maybe says, “Hey, I’m going to go buy a thousand of these washers and dryers,” and I’m going to go approach multifamily owners and I’m going to stick these new washers and dryers in there and we’re going to do a rev share or a split with the owner.

And then you’re not necessarily in real estate. You’re essentially leasing out the laundry room. And this plays out to be about on a larger. We just got a check for $100,000 to buy all these washers and dryers. And we anticipate to make almost all of our money back within the first year and definitely within the first two years and even thereafter, about a 20% return for the company and a 20% return for the apartment owner on a rev share like that’s a private equity deal, right? Now, you couldn’t get access to that unless you knew me, right? The same thing, like if I wanted to get access, is it being in the right rooms? Is it being in the right masterminds? Is it networking with those groups? Is it going to specific type of events? How do I meet more people that have access to deal flow like you do and I do?

Andy Hagans: That’s a great question. And, I mean, the scenario or the business that you described, it’s almost towards the entrepreneurial end of private equity. You know, as I said, there’s a spectrum between LP and GP and spectrum of how passive versus active you want to be. Sometimes there’s a sweet spot, right, where you can get a little bit of GP and still be mostly passive. I love that sweet spot. How do you get access to the deals? You know, you mentioned masterminds. You mentioned events. You mentioned networking. My big thing is skin in the game. So, you’re talking about your network and your partners, your investors, people you invest with. I think the biggest thing that blocks people is getting started is taking a little bit of risk. So, like because it’s scary, right? Like, this venture capital fund that I mentioned earlier, this is the first venture capital fund that I’ve ever invested in. And it’s like I’m not a venture capital expert but I trusted the person running this fund. Now, I could lose my money, right? So, I didn’t invest like my whole life savings into this fund. I made a decision like, “Okay. This is an amount that I can afford to invest here.”

But once you have skin in the game and skin in the game doesn’t necessarily just need to be a check. There’s different types of skin in the game but showing up in person to events, joining a mastermind, that’s generally going to be fairly pricey. In the grand scheme of things, it might have fantastic ROI but that’s an investment. Once you have skin in the game, I find people take you so much more seriously as well they should. I mean, that’s generally how I look at potential partners. That’s like question one is do you have skin in the game in this industry, in this deal, in this community? And so, I think the thing that blocks people is just getting started like in real estate, the first deal. So, my best advice to people is get started. Whatever way you’re comfortable, it could be the smallest check that you can possibly make. It doesn’t matter. Just get started, get skin in the game.

Josh Cantwell: And if you believe and like the fintech firms that allow people to make relatively small investments like 5,000, 25,000 to get started because, look, I’ve worked with guys that have multiple eight-figure and nine-figure net worths. And sometimes if they don’t know the space but they like the idea, they’re like I’m going to start really small. And often they go bottom seeking on what’s the minimum, how much is the minimum? How much is the minimum? Because they just want to get a little, like you said, get a little bit in, a little bit of skin in the game. And then as they see it, they understand it, now they kind of open up the checkbook. I had a guy that started with me with $50,000 who’s now into us for about a million and a half. That’s very normal, right? If you believe if somebody has got smaller dollars, they might be accredited, they might be worth a million, couple of million, but maybe they’re still making their first investment in a space. It could be venture. There’s these online portals now where people can log in, they can see deal flow, they can pick a deal, can be a real estate deal, could be a business, could be a rescue deal, whatever, and make some small investments just to get their toe in the water. Have you done that? Do you believe in that as a possible starter?

Andy Hagans: I do for sure. I mean, to me, there’s almost no wrong way to get started. The important thing is to get started. And so, there’s all these crowdfunding portals now where you don’t have to be an accredited investor. And to be clear, I 100% support that. I love it when all these alternative asset classes have improved access to all investors, not just accredited investors. But I will say if you really want to learn a space, start in whatever way is comfortable for you, but you really want to get as much skin in the game as you realistically can. So, for instance, take real estate. You might instead of writing a check to a crowdfunding portal, maybe you can directly own a property with a relatively small amount of money. You know, depending on your budget, you’re probably going to learn a lot more that way. So, again, I’m not pooh-poohing the crowdfunding portals. I do like them. But if your goal is to learn and to improve your skill set, you need to think about this isn’t just an investment with my money to get dollars and cents back. I’m also treating it as a learning experience like I’m going to go get my MBA in this asset class by making an investment and learning about it.

Josh Cantwell: Yeah, love it. Andy, tell us about your WealthChannel. It’s a community for high-net-worth individuals investing in alts. Tell us about that and then peel back the onion a little bit and tell us how you personally got started investing in alts. Everyone loves to hear the journey, the process, especially those people that want to make the leap and invest in their first, alternate investment but haven’t done it yet. So, tell us about the channel now because now you kind of lead and run this community of high-net-worth individuals investing in alts but you also started with your very first deal at some point back in the day where you weren’t the expert and you were kind of probably really nervous and not really sure where to begin. So, tell us about the channel today and tell us how it all started.

Andy Hagans: Yeah. No, that’s a great question and I never thought that I would be here ten years ago. So, I almost think it’s better to start at the beginning. I didn’t start out in financial services or anything like that. In WealthChannel, we run events and education on alternative investments to help educate high-net-worth investors. But where we started, my partner Jimmy Atkinson and I, it started in our dorm room. So, I was 19 or 20 and he was a year older because he was a class ahead of me. And we started our first business together. And that business grew into another business after we graduated that we scaled. It was online business, online marketing business. We ended up selling it and then we built another business and scaled it and sold it and built a third business. One of the businesses we built was called ETF Database, which at one point in time was the largest independent media property covering exchange-traded funds in the United States. So, we kind of built these series of businesses. And as a lot of entrepreneurs do, when you’re building a business, you’re kind of imagining building it really big and having a liquidity event, right, selling it and kind of having a big payday.

Well, we did that basically four times, and every time it’s like you get a check or a wire and you’re like excited, get a dopamine hit. And then 24 hours, it’s like, now what? And after we did it, the fourth, literally, I must be kind of thick because it took me several times to kind of learn this lesson. You know, it’s like, “Now what?” And you take some of the proceeds of the sale of that business and you’d invest. And at that time we were investing in index funds and ETFs. You put it on the S&P and the yield on the S&P is 1.8% or 1.6%. It’s just like, “What the heck are we doing?” You know, because the yield and the return on these traditional investments, frankly, is terrible. In the bond market, as I mentioned, financial repression after inflation or if it’s in a taxable account, you’re paying taxes on your bond income, it’s negative yield. So, we started saying, “Okay. That’s what led to my first private equity deal where I invested in this fintech firm.” But we also started looking at and Jimmy and I, we kind of stayed in contact because we’ve been business partners throughout these deals.

We started looking into other forms of investments that just yielded higher. In academic terms, they call it the illiquidity premium, which is why Yale and Harvard endowment do this, why they invest in private real estate, private equity, venture capital. They’re just fundamentally better investments if you don’t need the liquidity, right? If you need the liquidity, if you’re going to need cash in the next 24 months, then don’t lock it up in private real estate for sure. But once you reach a certain level of wealth and assets, how much liquidity do you really need? So, we just started investing in deals in all sorts of different funds. And so, I didn’t really seek out to be like an expert in alternative investments but it’s more just I’ve had this ten-year crash course by just sort of doing it. And so, the lessons I’ve learned, I’ve kind of learned the hard way. To be honest, I’ve made lots of mistakes. I can be honest about that but I’ve also had some big successes. And a lot of times the wins in real estate, some of these asset classes more than pay for the losses.

So, bringing us to WealthChannel, Jimmy and I, we have this kind of small community of other entrepreneurs and investors that we’re networked with. And Jimmy and I, we both started podcasting just talking about this stuff, and we just say, “Let’s form a community around it where we’re podcasting, we’re releasing this education. We’re also going to start to run events.” And so, at our events, which are totally online, we are essentially matchmaking accredited investors on the one hand with alternative investment opportunities on the other hand. And these are opportunities. They’re meant for accredited investors. You know, they typically have minimums of $50,000 or $100,000 or something like that but private credit, private equity, private real estate, of course, those sorts of opportunities. So you asked earlier, how do you get started coming to one of our events, if I could talk my book coming to one of our events.

Josh Cantwell: Yeah. Man, let’s just go to one of your events and learn it all over a day or two or three. That’s great.

Andy Hagans: Yeah, absolutely. And sometimes you can go to an event and get pitched like that’s kind of the whole concept is you can show up and in one day you’re going to hear presentations from 12 or so different private funds and they could be all over the place, again, from private credit, you might see farmland. I’m sure you’ll see multifamily. Most of our events, there’s multifamily. It’s always a favorite asset class for good reason. You can kind of just…

Josh Cantwell: Cannabis, different types of senior secured debt funds, mezzanine debt funds. There’s a lot of different types of capital that’s out there that people can maybe go to the bank for a certain amount of money. And then there’s the next tranche, the next part of the stack that maybe comes in a year or two later or maybe it comes in simultaneously that the bank doesn’t want to fund. And maybe because that’s slightly higher risk or considered a second position, the interest rates or the returns are much higher where you can get maybe a fixed rate plus equity or something along those lines. As long as you said like, again, go back to having a proven track record with a proven operator in that space who’s in that deal. Those are what I wrote down. And they understand the space or you understand the space, then you’re like, “Okay. Like I get the space. I get this operator. I know what they’re going to do with the money.” Kind the uses of proceeds is very important. And that’s obviously in the PPMs for real estate.

But, man, I mean, look at what’s happening with the economy, you look at what’s happening with inflation, you look at the nutritional investments, the volatility, and so much even of the S&P 500 or the Dow is based off of big mega tech right now. There’s not a lot of yield and other places outside of that but mega tech is also extremely volatile, can easily be down 30% right now, and that investment from a year ago and be eating 6.5%, 7% inflation in the face. So, you’re actually almost down 40% on that money versus am I going to buy some cash-flowing real estate or buy senior secured debt fund that maybe pays a 6 or an 8 or a 10 pref plus equity or plus some other benefits to that plus depreciation. You’re not only outpacing inflation and preserving your principal but you’re also out of the market where, you know, Andy, I think this is one of the things that just blows my mind is that when I was in the financial markets in 2001 and companies like Enron literally went from billions of dollars to zero overnight, and Qualcomm I think was another one, it was a few back then that people literally I had investor friends of mine, clients that had hundreds of thousands of dollars in those literally, and within a week the thing went down to zero.

And it’s something like every year six out of ten publicly traded companies lose like 50% of their value and then other companies gain a certain amount of their value. And so, the volatility is tremendous. And if you’re looking at, excuse me, over the next couple of years with some of this recession, inflation, U.S. dollar trouble, banking collapses, like we really just want to throw in the market and let it rip and see what happens? No thanks. I’d rather give it to a friend of mine or loan it to them or invest in their fund or invest in their venture capital idea than just, “Hey, let’s put it in the stock market and let it rip.” I think that’s the message here. Finding the right deals, finding alternatives. There’s a million different options out there. Where do you get access to the stuff? Where do you find deal flow? Well, you sign up to go to Andy’s event.

Go to WealthChannel, go to the event, learn about it through some of those presentations and pitches, and you’re going to learn a bunch of stuff. You don’t make an investment the first time, great. Come back the second, third, fourth, fifth of that. Get the education. I believe in alts. It’s absolutely where we have most of our money, and I think it’s something everybody must do. I was a financial advisor, Andy. I didn’t tell you this. From 1997, when I graduated college, I got my Series 6, 66, 63 life and health license until 2004, 2005. I was a traditional financial advisor. I used to charge fees to write financial plans. I used to charge a 1% management fee, all that type of stuff. And I was doing that in the middle of the 2001 tech bubble crash. How much control do you think I had over those client accounts when all of that tech was just absolutely imploding? So, I learned my lesson very young in my very early twenties to love and approve and really invest in alts. I had that very real scenario and you had some very real scenarios yourself. So, for my audience, that’s my advice.

Andy, as we kind of wrap up, what kind of final pieces of advice would you give the audience? Where do you think they should start? Where do you think they should do, especially over the next couple of years with all the volatility that we’re going to experience?

Andy Hagans: Well, I think you have to educate yourself. So, as passionate as I am about alternatives, I wouldn’t tell anybody like just liquidate everything and just write a bunch of checks and be invested tomorrow without learning about it. So, it is true but I think this is true of all investments. You have to be willing to educate yourself. So, invest in education. I mean, if you have a multimillion-dollar portfolio that you have saved or amassed as a professional, as a businessperson with doing real estate, that’s your money, that’s your nest egg. No one is going to care about that as much as you do. So, I’m all about having advisors, legal advisors. If you have a financial advisor, that’s great, tax advisor. I love my CPA, my tax advisor. I’m all about getting advice but understand no one is going to care about your money as much as you do. So, you can’t just like fully outsource the knowledge of investments. You have to be willing to learn yourself. My next piece of advice is if you have a particular passion in alt, like if you’re attracted to private credit some of these yields are 10%, 12, 14%, if you love that yield, if you’re attracted to farmland, if you’re attracted to multifamily, that’s okay.

You don’t have to necessarily invest in everything. If there’s something that you’re passionate about, you’re more likely to put the time in to learn about that asset class and you’re more likely to succeed. So, we don’t all have to have the same portfolio. To me, keep your eye on the ball, which is I’m not just after a portfolio, right? I’m after a lifestyle. I want to take care of my family. I want to live a life where I know that our future is secure. And so, if you’re keeping your eye on the lifestyle, not just the portfolio, then think about what kind of portfolio allows you to sleep at night. And whatever those asset classes are that you feel most comfortable with, I’d say invest in education in those. And then again, the most important thing is just get started. You know, don’t let yourself sit on the sidelines. I did that for too long, too long with real estate. I just kind of sat on the sidelines, watched other people invest in you. Finally, someday you’re going to say, “You know what, I don’t care if I’m a beginner. I’m just going to start.”

Josh Cantwell: Fantastic stuff. Guys, shortcut to start, go to Andy’s website WealthChannel.com/Events. I’m on there right now on my other screen. They have upcoming events called the Alts Expo, the WealthChannel Summit, and the OZ Pitch Day. Check those out, register online, and learn more about it and then hopefully take your alternate investments to the next level. Andy, listen, thanks so much for carving out some time for us today on Accelerated Investor.

Andy Hagans: Thanks, Josh. I had a blast.

[CLOSING]

Josh Cantwell: Hey, guys. Hope you enjoyed that episode of Accelerated Investor. Man, I enjoy talking to guys like Andy because I used to be a financial advisor. I was a financial planner. I know what the traditional markets look like and it ain’t good. You know, people that sell into these different companies, mutual funds, and stocks, nobody knows if they’re going to go up and down in value. How is it possible that a company like Amazon are down 27% last year? How is it possible that a company like Facebook could lay off 20,000 employees after COVID when they were just absolutely killing it and all of a sudden massive layoffs and stock prices down 25, 35%, and inflation’s barking and nipping at your heels? Alternate investments to me is one of my passions. So, I had a great time on this podcast with Andy Hagans, the co-CEO of WealthChannel. So, if you enjoyed it, subscribe, rate, review, and like the podcast. I would be so grateful if you would do that. And we’ll see you on the next show. Take care.

[INTRODUCTION]

Josh Cantwell: So, hey, guys. Welcome back. It’s your host, Josh Cantwell. Thanks for jumping on and listening and participating and being a part of the community. Today, I have a special guest on the show. His name is Andy Hagans. He is the co-founder at WealthChannel, a leading community for high-net-worth investors and advisors who placed capital in alternative investments. He’s also the host of The Alternative Investment Podcast, the number one Alts podcast reaching RIAs, family offices, and high net worth investors. He’s also the host of the WealthChannel Live Events. And that is a platform where they bring in accredited investors, high net-worth investors, and match them up with sponsors that have alternate investments. It could be private equity, it could be venture capital, it could be real estate syndications, you name it. They want to focus on alternate investments. And today, we’re going to talk about, number one, how to pick a winner, how to pick a general partner or pick a winner, pick an investment. If you invest in alternatives as a limited partner, they must, number one, have a proven track record and, number two, must be a space that they understand.

Number two, we’re going to talk about crowdfunding and how to start investing in alternative assets through crowdfunding. We’re going to talk about, number three, what’s called the illiquidity premium, the idea of earning higher returns in alternative assets because they can be illiquid like real estate, oil and gas, cannabis, crypto, private credit, things like that. And also, why financial advisors have pivoted from the traditional 60/40 diversification model to a 50/30/20 model, including alternate investments. You’re going to love this episode of Accelerated Investor with Andy Hagans, the CEO and President of WealthChannel. Here we go.

[INTERVIEW]

Josh Cantwell: So, hey, Andy. Hey, welcome to Accelerated Investor. So excited to have you on the show to talk about some alternate investment opportunities and talk about your kind of view of the marketplace based on what’s going on. So, thanks for carving out a few minutes for the show. 

Andy Hagans: Very happy to be here. I love your show. I know you have a big thing going here so I’m just happy to connect with you and your audience. 

Josh Cantwell: Absolutely, Andy. So, let’s talk about alternatives a little bit relative to today’s market. You know, the market’s weird. Let’s just do a quick recap. A month ago, the ten-year Treasury was up at 4, 4.2. A lot of people were saying that the cost of debt was becoming very prohibitive to be in business or to be a real estate entrepreneur to start a new company. All of a sudden today, the ten-year Treasury is down to 3.2, which is allowing the cost of debt to be more affordable, which will probably create some more transaction volume. You know, there’s all this talk now about China going in and buying and contracting in oil with Saudis and Russia and the yuan and the U.S. dollar losing value because of inflation. Your focus is alternate investments. And so, if you look at today’s market, what are you most excited about or most concerned about? 

Andy Hagans: Which really you already kind of mentioned them, Josh, and they’re almost the same thing or they’re two sides of the same coin. What I’m most concerned about is financial repression. You know, you mentioned the ten-year being in the low threes now and inflation is in the six or sevens or kind of depends on who you ask if you trust the CPI or not. But investors are looking at this entire category in traditional investments, fixed income, and on an after-inflation, after-tax basis, it’s very negative. So, that’s financial repression where the earnings that you can earn in any reasonably safe fixed income are actually negative after inflation. So, what I’m most excited about is kind of the other side of that coin. So, you add in financial repression with fixed income, you add in the extreme volatility in the stock market, more and more investors are shifting into alternative investments, and that’s my wheelhouse. That’s what I’m passionate about. That’s what I’m excited about.

And honestly, family offices, institutional investors, Harvard and Yale endowments, some of the most sophisticated ultra-wealthy investors have been investing in alts for decades now. And it’s finally, to me, it’s like it’s the moment of alts when it’s finally kind of hitting the mainstream where if I could use the phrase everyday millionaires or your kind of everyday accredited investors are really embracing alts. 

Josh Cantwell: So, define alts for me. What for our audience like in your mind, Andy, in what you like to invest in or talk to your investors about and you investing your own personal dollars in alts, define that for us from your perspective. What does that mean to you? 

Andy Hagans: So, it’s funny, you can ask a hundred different alternatives experts, get a hundred different answers, but to me, anything besides stocks, bonds, and cash or cash-like instruments. And when I say stocks and bonds, I’m also including in there traditional wrappers, like mutual funds, index funds, ETFs that own those instruments in like a long-only fashion. So, anything besides those, to me is an alternative investment. So, everything from collectibles and commodities and precious metals to also things that are in funds, in products like private equity funds, private real estate funds, venture capital funds. And so, really my focus is more on the latter. It’s on alternative investments that yield income. I mean, perennially, I find income is popular. It’s popular with me but it’s popular with everybody, right, institutional investors, family offices. And so, to me, that’s kind of my sweet spot is alternative investments that don’t have the volatility of the public markets that yield substantial income. They tend to also have most of them have very attractive tax advantages. I know you have a lot of real estate investors in your audience. So, that’s kind of my wheelhouse, the private equity venture capital and private real estate. 

Josh Cantwell: Got it. Love it. So, if you listen to Robert Kiyosaki, he’s become more and more bearish on the US economy, the dollar, and talks a lot about the same things that you’re mentioning. But he’s been that way since he’s been that way forever, right? He’s been anti-stock market looking at alternative investments. So, most people probably still a great percentage of their wealth is in the stock market, traditional stocks, bonds, mutual funds. If you’re talking to one of those people, that’s a reasonable net worth, high net worth investor but still is doing traditional things. Maybe they own a business, they’re making a couple million bucks a year personal income, they’ve built up stock account that’s worth millions and they maybe have a business of their own that they run. What’s the first step for them? Like, what is the first thing that you would talk about with someone like that to talk about alternative investments? Is it the tax advantages? Is it the risk? Is it derisking their portfolio?

And then what’s the first thing that they should look at from your perspective? Is it real estate? Is it investing in industrial real estate, multifamily real estate? Is it investing in a business like an e-commerce business that can be taken over that’s maybe being sold at a discount? So, first, let’s talk about the person that’s got most of their money in traditional investments and what first steps should they take to begin looking at alts? 

Andy Hagans: Yeah, that’s a great question. And to be clear, I don’t coach people like liquidate your traditional portfolio and put it all in alternatives. I still own traditional investments but big believer in diversification. But that being said, kind of a starting point, I would say the old 60/40 portfolio, even a lot of advisors, traditional financial advisors are now talking about the 50/30/20. So, I think step one is just sort of looking at your portfolio and saying, “Well, what do I own right now? What’s my asset allocation right now and what do I want it to be?” And to your other question, what’s the primary appeal of alternatives? I mentioned income, but I really think more and more it’s capital preservation. I think a lot of investors are turning to alternative investments because they’re sick and tired of the volatility in the public markets. And so, by investing in some of these illiquid funds, people talk about there’s illiquidity risk. To me, illiquidity actually helps me sleep at night. He’s like, “Let’s take a private equity deal that I’ve done.” You know, I’m a partner in a private equity business, general partner, and limited partner. And I just own the business. And so, it cash flows and I get basically a monthly dividend. There’s no stock market that’s repricing it every single day making me nervous.

So, to me, if you think about illiquid alternative investments, is that the kind of lifestyle you want, passive income without necessarily having to check your balance every day? And some investors might say, “You know what, I don’t care if the stock market’s on this wild roller coaster. I’ll check my balance when I’m 65.” And if that’s you, like that’s fine but increasingly, I think a lot of high net worth investors, they’re interested in alts because of that capital preservation aspect, less volatility, and then those other things, income tax advantages, those are like sweeteners that make it even more appealing. 

Josh Cantwell: No doubt. You mentioned that you’re in a private equity business. So, if somebody says, “Hey I want to get started in alts real estate as a limited partner or general partner. We’ve talked about that 100 times in the show, right? Then people are like, “Okay. Yeah, we know about those opportunities and we’ve raised about $100 million and we know about those.” Outside of real estate, let’s go down a different path. Describe an investment or investments maybe that you’ve done that our audience could be aware of. Maybe that exact investment is not available anymore. It’s maybe fully subscribed or sold out or you’re not raising any money for it but describe a couple of those for us. And then high level, generally, how would somebody get access to a deal like that? 

Andy Hagans: Yeah. That’s a great question. And with all of these, I think with private equity or with real estate, and by the way, I mean private real estate and venture capital are really technically subsets of private equity, right? Private equity is just equity that’s private, that’s not publicly traded. But there’s a spectrum of how active do you want to be versus how passive do you want to be. And so, my personal portfolio, my personal alternative investments they’re actually across that spectrum, right? So, I have some investments where I’m just a totally passive LP, like in a private real estate fund. A couple of private equity deals that I’m involved in. One is a venture capital fund, and that’s the deal that I got access to. Just someone I knew. I knew the GP and he knew of me and we just had a relationship and actually, I think they had a pretty high minimum. But just because we had a relationship and I don’t want to say I did them a favor or anything but we’ve just helped each other kind of over the years. So, he invited me in to be an LP into that fund.

But there are other venture capital funds that they might have $100,000 minimum or $250,000, minimum, $500,000 minimum that you can just be an LP without any sort of invitation or anything like that. That’s the purely passive end of the spectrum. Probably my best deal to date in private equity was on the more active side, right? So, in the real estate world, this would be more like being a GP or being a GP/LP, or co-GP. All these terms we throw around, they kind of confuse people but basically, if you’re a GP, a general partner, you’re active in the deal, right? You’re adding value somehow, maybe you’re helping with the management. So, this was a company, a fintech company in the payments processing space, and I basically made an early investment and I also offered to help them just strategically because I’m familiar with marketing and some different ways to scale businesses because I’ve done that in the past. And so, this has just been one of those quiet, boring businesses that it’s had some little ups and downs but it’s just kind of consistently grown over five years. And I’ve never even looked at the numbers cash-on-cash but I’ve done very, very well with it.

And again, that’s an investment. I wrote a check once and then it’s almost like mentally you write off if you write a check like that into an illiquid business, you write it off. And I’ve never really had to worry about it again in the sense of like when the S&P is down by 20%, it’s like it doesn’t affect my private equity investment. 

Josh Cantwell: And how did you evaluate that? Like, you got access to a friend. You said it was an early investment but what were some of the traits of that deal that you liked? Was it the way that they were going to grow? Was it that they have a unique niche in the market? Like, if I had never, let’s say I’m worth $10 million and I’ve got a million deployable liquid and I want to look at something similar, and I just don’t know about making that first investment, what are some things that you saw in that, that kind of hit your checkbox, that hit your checklist and said, “Yeah, I like it?” Tell us about that. Help our audience understand a little bit about what you think goes into a good deal like that. 

Andy Hagans: That’s a great question. And I think there are fundamentals that apply to any niche, whether it’s real estate or private equity. Number one is a proven track record and a partner that you trust, right? If I’m talking about doing a deal or investing in a fund, if I don’t trust the principals, the GPs, just walk away like I don’t care what projected IRR is. It’s just if you don’t have that trust, walk away. So, this is someone that I knew and they had a proven track record. So, it’s not just a track record like in the abstract. I look for someone who has a track record in this space and that deal. So, for instance, if I’m investing in a multifamily fund, I want the GP to have a track record in multifamily, right? I don’t want to be their first rodeo as a limited partner to sort of use my cash for them to be their learning cash so track record sponsor that I trust. And then I would also say a space that I understand, right? You know, maybe I don’t understand every single nook and cranny but online for me, online marketing, fintech, recurring revenue, business models, those are things I’m very comfortable evaluating.

And so, I think if you’re in a space where it’s very hard for you to evaluate what the sponsor is doing, to me, it might be a great deal but if I can’t understand it, then I’m just not comfortable writing the check. And I think that’s why a lot of folks are attracted to real estate and even some spaces in real estate like multifamily because they’re easier to understand, there’s nothing wrong with that, by the way. Boring businesses that you understand can be fantastic businesses. 

Josh Cantwell: Absolutely. The businesses and you mentioned the diversification. So, when you said 60/40, like people that have worked with an advisor or have their own portfolio of 60/40 stocks-bonds, that type of thing, then you mentioned 50/30/20. What did you mean by that? 

Andy Hagans: So, 60/40 would be like 60% stocks, 40% bonds or fixed income portfolio. That’s like a traditional either retirement portfolio or institutional portfolio. That’s almost considered to be like the default portfolio in the abstract with traditional investments. So, the 50/30/20 is basically in the financial advisory space. You know, a lot of folks, their financial advisors, RIAs, financial professionals are basically saying, look, the new default portfolio has a 20% allocation to alternatives. And when they’re talking about that 20% allocation, I mean, that could really mean anything in the abstract but I think the biggest slices of that would be real estate, would be probably the biggest, you know, that’s the biggest sub-asset class within alternatives, if you want to call it that, although it’s an 800-pound gorilla but then also venture capital and private equity would be in that 20. 

Josh Cantwell: Okay. Got it. Love it. So, you mentioned that you were able to get into that deal because you knew the sponsor had a relationship with them. Again, if somebody doesn’t have that yet, where can they go? What can they do to meet possible sponsors, to meet possible partners, maybe other GPs that have a deal? They’re going to do a raise and give up some equity and they’re going to the next level. I’m partially asking for my audience and partially asking for me because I’m always looking for the next thing, right? And I’ve got a big piece of my personal net worth is in real estate in our 4,000 units of apartments. You can do the math. It’s pretty big. But we’ve done some things even within, like you mentioned, spaces that I understand. For example, we started a laundry business, right? So, buying the laundry machines that we could put into our apartment buildings and other people’s apartment buildings without giving away too much you can buy a set of laundry. Give you an idea, washer and dryer for about $1,500 apiece. It’s about $3,000, right? 

If you buy that and put it in a garden-style apartment, let’s say there’s between 12 and 18 units in that garden-style apartment, let’s say 15, to use a round number, that washer dryer should make about $20 to $25 per month per unit. So, 15 units times $20 a month, it’s not a ton but it’s $300 a month in income. They’re brand-new washers and dryers that have zero expenses because they’re brand new. Very little maintenance, very little overhead. And I can essentially make back the entire purchase of the washer and dryer in year one. That’s a boring cashflow play and there’s huge companies, Laundry One and CSC, and these other companies that have been in the space. But as they’ve gotten huge and CSC is a billion-dollar company, their customer service with their owners, the apartment owners has gotten horrible. And so, a simple play there, that would be like a private equity type of play where a guy like me maybe says, “Hey, I’m going to go buy a thousand of these washers and dryers,” and I’m going to go approach multifamily owners and I’m going to stick these new washers and dryers in there and we’re going to do a rev share or a split with the owner.

And then you’re not necessarily in real estate. You’re essentially leasing out the laundry room. And this plays out to be about on a larger. We just got a check for $100,000 to buy all these washers and dryers. And we anticipate to make almost all of our money back within the first year and definitely within the first two years and even thereafter, about a 20% return for the company and a 20% return for the apartment owner on a rev share like that’s a private equity deal, right? Now, you couldn’t get access to that unless you knew me, right? The same thing, like if I wanted to get access, is it being in the right rooms? Is it being in the right masterminds? Is it networking with those groups? Is it going to specific type of events? How do I meet more people that have access to deal flow like you do and I do? 

Andy Hagans: That’s a great question. And, I mean, the scenario or the business that you described, it’s almost towards the entrepreneurial end of private equity. You know, as I said, there’s a spectrum between LP and GP and spectrum of how passive versus active you want to be. Sometimes there’s a sweet spot, right, where you can get a little bit of GP and still be mostly passive. I love that sweet spot. How do you get access to the deals? You know, you mentioned masterminds. You mentioned events. You mentioned networking. My big thing is skin in the game. So, you’re talking about your network and your partners, your investors, people you invest with. I think the biggest thing that blocks people is getting started is taking a little bit of risk. So, like because it’s scary, right? Like, this venture capital fund that I mentioned earlier, this is the first venture capital fund that I’ve ever invested in. And it’s like I’m not a venture capital expert but I trusted the person running this fund. Now, I could lose my money, right? So, I didn’t invest like my whole life savings into this fund. I made a decision like, “Okay. This is an amount that I can afford to invest here.”

But once you have skin in the game and skin in the game doesn’t necessarily just need to be a check. There’s different types of skin in the game but showing up in person to events, joining a mastermind, that’s generally going to be fairly pricey. In the grand scheme of things, it might have fantastic ROI but that’s an investment. Once you have skin in the game, I find people take you so much more seriously as well they should. I mean, that’s generally how I look at potential partners. That’s like question one is do you have skin in the game in this industry, in this deal, in this community? And so, I think the thing that blocks people is just getting started like in real estate, the first deal. So, my best advice to people is get started. Whatever way you’re comfortable, it could be the smallest check that you can possibly make. It doesn’t matter. Just get started, get skin in the game. 

Josh Cantwell: And if you believe and like the fintech firms that allow people to make relatively small investments like 5,000, 25,000 to get started because, look, I’ve worked with guys that have multiple eight-figure and nine-figure net worths. And sometimes if they don’t know the space but they like the idea, they’re like I’m going to start really small. And often they go bottom seeking on what’s the minimum, how much is the minimum? How much is the minimum? Because they just want to get a little, like you said, get a little bit in, a little bit of skin in the game. And then as they see it, they understand it, now they kind of open up the checkbook. I had a guy that started with me with $50,000 who’s now into us for about a million and a half. That’s very normal, right? If you believe if somebody has got smaller dollars, they might be accredited, they might be worth a million, couple of million, but maybe they’re still making their first investment in a space. It could be venture. There’s these online portals now where people can log in, they can see deal flow, they can pick a deal, can be a real estate deal, could be a business, could be a rescue deal, whatever, and make some small investments just to get their toe in the water. Have you done that? Do you believe in that as a possible starter? 

Andy Hagans: I do for sure. I mean, to me, there’s almost no wrong way to get started. The important thing is to get started. And so, there’s all these crowdfunding portals now where you don’t have to be an accredited investor. And to be clear, I 100% support that. I love it when all these alternative asset classes have improved access to all investors, not just accredited investors. But I will say if you really want to learn a space, start in whatever way is comfortable for you, but you really want to get as much skin in the game as you realistically can. So, for instance, take real estate. You might instead of writing a check to a crowdfunding portal, maybe you can directly own a property with a relatively small amount of money. You know, depending on your budget, you’re probably going to learn a lot more that way. So, again, I’m not pooh-poohing the crowdfunding portals. I do like them. But if your goal is to learn and to improve your skill set, you need to think about this isn’t just an investment with my money to get dollars and cents back. I’m also treating it as a learning experience like I’m going to go get my MBA in this asset class by making an investment and learning about it. 

Josh Cantwell: Yeah, love it. Andy, tell us about your WealthChannel. It’s a community for high-net-worth individuals investing in alts. Tell us about that and then peel back the onion a little bit and tell us how you personally got started investing in alts. Everyone loves to hear the journey, the process, especially those people that want to make the leap and invest in their first, alternate investment but haven’t done it yet. So, tell us about the channel now because now you kind of lead and run this community of high-net-worth individuals investing in alts but you also started with your very first deal at some point back in the day where you weren’t the expert and you were kind of probably really nervous and not really sure where to begin. So, tell us about the channel today and tell us how it all started. 

Andy Hagans: Yeah. No, that’s a great question and I never thought that I would be here ten years ago. So, I almost think it’s better to start at the beginning. I didn’t start out in financial services or anything like that. In WealthChannel, we run events and education on alternative investments to help educate high-net-worth investors. But where we started, my partner Jimmy Atkinson and I, it started in our dorm room. So, I was 19 or 20 and he was a year older because he was a class ahead of me. And we started our first business together. And that business grew into another business after we graduated that we scaled. It was online business, online marketing business. We ended up selling it and then we built another business and scaled it and sold it and built a third business. One of the businesses we built was called ETF Database, which at one point in time was the largest independent media property covering exchange-traded funds in the United States. So, we kind of built these series of businesses. And as a lot of entrepreneurs do, when you’re building a business, you’re kind of imagining building it really big and having a liquidity event, right, selling it and kind of having a big payday.

Well, we did that basically four times, and every time it’s like you get a check or a wire and you’re like excited, get a dopamine hit. And then 24 hours, it’s like, now what? And after we did it, the fourth, literally, I must be kind of thick because it took me several times to kind of learn this lesson. You know, it’s like, “Now what?” And you take some of the proceeds of the sale of that business and you’d invest. And at that time we were investing in index funds and ETFs. You put it on the S&P and the yield on the S&P is 1.8% or 1.6%. It’s just like, “What the heck are we doing?” You know, because the yield and the return on these traditional investments, frankly, is terrible. In the bond market, as I mentioned, financial repression after inflation or if it’s in a taxable account, you’re paying taxes on your bond income, it’s negative yield. So, we started saying, “Okay. That’s what led to my first private equity deal where I invested in this fintech firm.” But we also started looking at and Jimmy and I, we kind of stayed in contact because we’ve been business partners throughout these deals.

We started looking into other forms of investments that just yielded higher. In academic terms, they call it the illiquidity premium, which is why Yale and Harvard endowment do this, why they invest in private real estate, private equity, venture capital. They’re just fundamentally better investments if you don’t need the liquidity, right? If you need the liquidity, if you’re going to need cash in the next 24 months, then don’t lock it up in private real estate for sure. But once you reach a certain level of wealth and assets, how much liquidity do you really need? So, we just started investing in deals in all sorts of different funds. And so, I didn’t really seek out to be like an expert in alternative investments but it’s more just I’ve had this ten-year crash course by just sort of doing it. And so, the lessons I’ve learned, I’ve kind of learned the hard way. To be honest, I’ve made lots of mistakes. I can be honest about that but I’ve also had some big successes. And a lot of times the wins in real estate, some of these asset classes more than pay for the losses.

So, bringing us to WealthChannel, Jimmy and I, we have this kind of small community of other entrepreneurs and investors that we’re networked with. And Jimmy and I, we both started podcasting just talking about this stuff, and we just say, “Let’s form a community around it where we’re podcasting, we’re releasing this education. We’re also going to start to run events.” And so, at our events, which are totally online, we are essentially matchmaking accredited investors on the one hand with alternative investment opportunities on the other hand. And these are opportunities. They’re meant for accredited investors. You know, they typically have minimums of $50,000 or $100,000 or something like that but private credit, private equity, private real estate, of course, those sorts of opportunities. So you asked earlier, how do you get started coming to one of our events, if I could talk my book coming to one of our events. 

Josh Cantwell: Yeah. Man, let’s just go to one of your events and learn it all over a day or two or three. That’s great. 

Andy Hagans: Yeah, absolutely. And sometimes you can go to an event and get pitched like that’s kind of the whole concept is you can show up and in one day you’re going to hear presentations from 12 or so different private funds and they could be all over the place, again, from private credit, you might see farmland. I’m sure you’ll see multifamily. Most of our events, there’s multifamily. It’s always a favorite asset class for good reason. You can kind of just… 

Josh Cantwell: Cannabis, different types of senior secured debt funds, mezzanine debt funds. There’s a lot of different types of capital that’s out there that people can maybe go to the bank for a certain amount of money. And then there’s the next tranche, the next part of the stack that maybe comes in a year or two later or maybe it comes in simultaneously that the bank doesn’t want to fund. And maybe because that’s slightly higher risk or considered a second position, the interest rates or the returns are much higher where you can get maybe a fixed rate plus equity or something along those lines. As long as you said like, again, go back to having a proven track record with a proven operator in that space who’s in that deal. Those are what I wrote down. And they understand the space or you understand the space, then you’re like, “Okay. Like I get the space. I get this operator. I know what they’re going to do with the money.” Kind the uses of proceeds is very important. And that’s obviously in the PPMs for real estate.

But, man, I mean, look at what’s happening with the economy, you look at what’s happening with inflation, you look at the nutritional investments, the volatility, and so much even of the S&P 500 or the Dow is based off of big mega tech right now. There’s not a lot of yield and other places outside of that but mega tech is also extremely volatile, can easily be down 30% right now, and that investment from a year ago and be eating 6.5%, 7% inflation in the face. So, you’re actually almost down 40% on that money versus am I going to buy some cash-flowing real estate or buy senior secured debt fund that maybe pays a 6 or an 8 or a 10 pref plus equity or plus some other benefits to that plus depreciation. You’re not only outpacing inflation and preserving your principal but you’re also out of the market where, you know, Andy, I think this is one of the things that just blows my mind is that when I was in the financial markets in 2001 and companies like Enron literally went from billions of dollars to zero overnight, and Qualcomm I think was another one, it was a few back then that people literally I had investor friends of mine, clients that had hundreds of thousands of dollars in those literally, and within a week the thing went down to zero.

And it’s something like every year six out of ten publicly traded companies lose like 50% of their value and then other companies gain a certain amount of their value. And so, the volatility is tremendous. And if you’re looking at, excuse me, over the next couple of years with some of this recession, inflation, U.S. dollar trouble, banking collapses, like we really just want to throw in the market and let it rip and see what happens? No thanks. I’d rather give it to a friend of mine or loan it to them or invest in their fund or invest in their venture capital idea than just, “Hey, let’s put it in the stock market and let it rip.” I think that’s the message here. Finding the right deals, finding alternatives. There’s a million different options out there. Where do you get access to the stuff? Where do you find deal flow? Well, you sign up to go to Andy’s event.

Go to WealthChannel, go to the event, learn about it through some of those presentations and pitches, and you’re going to learn a bunch of stuff. You don’t make an investment the first time, great. Come back the second, third, fourth, fifth of that. Get the education. I believe in alts. It’s absolutely where we have most of our money, and I think it’s something everybody must do. I was a financial advisor, Andy. I didn’t tell you this. From 1997, when I graduated college, I got my Series 6, 66, 63 life and health license until 2004, 2005. I was a traditional financial advisor. I used to charge fees to write financial plans. I used to charge a 1% management fee, all that type of stuff. And I was doing that in the middle of the 2001 tech bubble crash. How much control do you think I had over those client accounts when all of that tech was just absolutely imploding? So, I learned my lesson very young in my very early twenties to love and approve and really invest in alts. I had that very real scenario and you had some very real scenarios yourself. So, for my audience, that’s my advice.

Andy, as we kind of wrap up, what kind of final pieces of advice would you give the audience? Where do you think they should start? Where do you think they should do, especially over the next couple of years with all the volatility that we’re going to experience? 

Andy Hagans: Well, I think you have to educate yourself. So, as passionate as I am about alternatives, I wouldn’t tell anybody like just liquidate everything and just write a bunch of checks and be invested tomorrow without learning about it. So, it is true but I think this is true of all investments. You have to be willing to educate yourself. So, invest in education. I mean, if you have a multimillion-dollar portfolio that you have saved or amassed as a professional, as a businessperson with doing real estate, that’s your money, that’s your nest egg. No one is going to care about that as much as you do. So, I’m all about having advisors, legal advisors. If you have a financial advisor, that’s great, tax advisor. I love my CPA, my tax advisor. I’m all about getting advice but understand no one is going to care about your money as much as you do. So, you can’t just like fully outsource the knowledge of investments. You have to be willing to learn yourself. My next piece of advice is if you have a particular passion in alt, like if you’re attracted to private credit some of these yields are 10%, 12, 14%, if you love that yield, if you’re attracted to farmland, if you’re attracted to multifamily, that’s okay.

You don’t have to necessarily invest in everything. If there’s something that you’re passionate about, you’re more likely to put the time in to learn about that asset class and you’re more likely to succeed. So, we don’t all have to have the same portfolio. To me, keep your eye on the ball, which is I’m not just after a portfolio, right? I’m after a lifestyle. I want to take care of my family. I want to live a life where I know that our future is secure. And so, if you’re keeping your eye on the lifestyle, not just the portfolio, then think about what kind of portfolio allows you to sleep at night. And whatever those asset classes are that you feel most comfortable with, I’d say invest in education in those. And then again, the most important thing is just get started. You know, don’t let yourself sit on the sidelines. I did that for too long, too long with real estate. I just kind of sat on the sidelines, watched other people invest in you. Finally, someday you’re going to say, “You know what, I don’t care if I’m a beginner. I’m just going to start.” 

Josh Cantwell: Fantastic stuff. Guys, shortcut to start, go to Andy’s website WealthChannel.com/Events. I’m on there right now on my other screen. They have upcoming events called the Alts Expo, the WealthChannel Summit, and the OZ Pitch Day. Check those out, register online, and learn more about it and then hopefully take your alternate investments to the next level. Andy, listen, thanks so much for carving out some time for us today on Accelerated Investor. 

Andy Hagans: Thanks, Josh. I had a blast. 

[CLOSING]

Josh Cantwell: Hey, guys. Hope you enjoyed that episode of Accelerated Investor. Man, I enjoy talking to guys like Andy because I used to be a financial advisor. I was a financial planner. I know what the traditional markets look like and it ain’t good. You know, people that sell into these different companies, mutual funds, and stocks, nobody knows if they’re going to go up and down in value. How is it possible that a company like Amazon are down 27% last year? How is it possible that a company like Facebook could lay off 20,000 employees after COVID when they were just absolutely killing it and all of a sudden massive layoffs and stock prices down 25, 35%, and inflation’s barking and nipping at your heels? Alternate investments to me is one of my passions. So, I had a great time on this podcast with Andy Hagans, the co-CEO of WealthChannel. So, if you enjoyed it, subscribe, rate, review, and like the podcast. I would be so grateful if you would do that. And we’ll see you on the next show. Take care. 

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