Ken Moraif
President Trump just signed an executive order allowing for cryptocurrency, real estate and private equity in your 401(k), this changes everything. Hello everyone, and welcome back to the Retirement Planners of America Podcast. I’m so glad you’re joining us. This is really an interesting topic. We have today. Looking forward to getting into it before I do. I am Ken Moray from the founder and CEO of Retirement Planners of America, and we, as the name implies, work with people who are over 50, who are retired or retiring soon. So if that’s you, we framed this all from the standpoint of retirement planning, and of course, 401(k)s fall right in the center of that and this presidential executive order. Holy cow. So I want to dive right into it. But before I do let me bring into the conversation our Chief Investment Officer extraordinaire, Jordan Roach, Jordan, good to see you. Happy Friday, by the way, ladies and gentlemen, you may notice I’m not wearing a tie. I’m not wearing a white shirt. This was his idea. He thinks I need to loosen up, but he didn’t loosen up. So we wouldn’t like overkill it. So if you guys have any comments on which

Jordan Roach
which wave, wave of confirmation. I’m

Ken Moraif
going to give everybody two points if they like your look and one point if they like my look.

Jordan Roach
Rather be four times people that are like

Ken Moraif
yours. We’ll see, we’ll see, we’ll see. All right, so the new executive order made some headlines, right? So from your perspective, you’re the chief investment officer, you’re going to be looking at incorporating this into retirement plans and all that. So what do you think I mean

Jordan Roach
this potentially be very exciting, certainly I mean the theme of private assets and real estate. Now crypto has has dominated kind of investment headlines and talk for for years. So now the thought that these could actually be put into 401(k) plans, employer plans, is really, really interesting, so I think it carries a bunch of potential for growth. Certainly opens up the landscape, but we’re going to need a lot of education on all those types of assets,

Ken Moraif
all right. Well, let’s do that. Let’s start with the upside. What’s, what’s the potential benefit of having cryptocurrency or real estate or private equity in your 401,

Jordan Roach
K, well, the primary benefit, potentially, you know, and all these assets work differently, is, you know, you’re going to have things in your portfolio that maybe act differently than traditional stocks and bonds that you would see in your four, one case. So what you’re hoping is these assets might be performing well, maybe when other parts that traditionally are not. So you have that correlation benefit. I think that’s nice. If you look specifically at crypto, okay, there’s all sorts of types of crypto, of course, you know that probably can add some additional growth opportunities. Maybe currency hedges, if you look at, you know, private equity, if you look at real estate, maybe it’s more income opportunities there. So the benefits are just, again, further range of risk profiles that you could map to growth potentials. I mean,

Ken Moraif
the upside if everybody starts buying crypto in the 401(k), you know, you think that Bitcoin is whatever it’s at right now, it’s going to go to like, 2 million a Bitcoin. Or

Jordan Roach
if it goes into the matrix, like more mainstream, yeah, if all that demand comes in there, everyone’s buying it, it’d be interesting, yeah. So it could certainly take it there. But, you know, again, I’m sure, like anything that carries reward, it carries, well,

Ken Moraif
let’s talk about that. Then, what’s the, what should what’s the flip side? What should people worry about? You know, if they’re gonna say, Okay, I want to put, you know, my 401(k) into into crypto, or real estate or private equity.

Jordan Roach
I mean, to me, the thing is really understanding the the downside, the risk profiles. So like we’ve seen with crypto, I mean, it can go to the moon one day and the next day. It’s, it’s, you know, it

Ken Moraif
can lose 40% in, like, very, very quickly, very short order. So you

Jordan Roach
know, if you’re not having a good hold of that. Really understand your risk tolerance. You can have some problems there you get. You know, with crypto has this issue, I’m certainly private equity and private placements, private credit and real estate have the illiquidity, right? So can I actually get to those dollars if I need to make withdrawal from my 401(k), all of a sudden? Yeah, if it’s in real estate, you probably won’t. You probably won’t. And so that’s the biggest thing. Is foreign case, traditionally, you know you have access to stocks and bonds instantly. You kind of know how those behave. All these the three things look different.

Ken Moraif
Yeah, private equity, sometimes they, they make you lock your up, lock your money up for for years, potentially, yeah, at least three or four years, because otherwise you don’t get your return on investment. And

Jordan Roach
there’s, and, I mean, there’s an argument, I think, that I’ve already seen from other investment houses, of saying, Do we really want to go down this path? I mean, it’s a dangerous path. Traditionally, these types of assets, not actually crypto, but, you know, the others, are even limited to people, to just kind of an average saver. They only allow it for other people. There’s a reason for that. So how we can do this in 41k you. We’re Be very mindful the risk there.

Ken Moraif
So President Trump signed an executive order. So like, what, in about a week, we’re going to be able to log into our 401(k) and just say, Buy Bitcoin,

Jordan Roach
yeah. Like, like, anything else, this is government work. So this does not move quickly. So that’s the first step, sure, is mass buy in from the executive branch. But then we have, you know, for one case, they are the most, probably one of the most regulated savings programs out there. So you have ERISA, you have Department of Labor, you have treasury, you got the, you know, sec Securities and Exchange Commission, that’s going to all have to sign off. So I don’t see this coming in the next few months. It could this could be next year, could be years could not get done.

Ken Moraif
All right? So people are listening to this, right? They’re watching and they’re thinking, Okay, I want in. So what’s the next smartest step? What should they do first, before they go in?

Jordan Roach
Well, to me, it’s really getting more education on how these specific assets would work before we get access. We really want to know how are these things looking so what I would probably do is start really understanding the crypto world. Look at, you know, the major cryptocurrencies. Understand the liquidity, the risk profile when they came online. How do they trade? Do they move with other assets? Same with, you know, private equity, private credit, same with real estate. So it’s more about, let’s get really smart on how these vehicles work. Do we really want them, even if they’re available, because everybody’s different place in life, right? And so we just got to really understand

Ken Moraif
what that looks like, and also how they diversify, right? Because I remember one time I met with with a couple, you know, his 401, K, and he had picked every large cap fund, you know, that they offer, they offer, like, six of them. So he had six large cap funds, and he thought he was diversified, because he had six of them, yes, but really, they were all invested in the exact same thing. So if you’re going to be diversified, you want to see how the different parts of your portfolio interact with each other. So if you’re going to do crypto or real estate or private equity, it’s important, you know, if it’s a diversifier or an intensifier,

Jordan Roach
okay, that’s, that’s a perfect point. So, yeah, I’ve seen this traditionally is, you know, you could have, and I’ll take a lot of 401(k)s, people are saving like this is where they have a lot of, you know, large cap or growth names, because that’s kind of been the super du jour for a while. Here they load up on growth stocks and they load up on crypto, not realizing those two things in the last 10 years, move up and down together and it gets magnified. That’s right. And so we got to understand how these assets behave together to make sure that any given point, if that part of the market in any of these are going down or up, what is the rest of my portfolio

Ken Moraif
gonna be doing? Yeah, is it gonna accentuate the positive or accentuate the negative? Yes, probably both. I would think sometimes both. So self serving questions, since we are retirement planners, financial advisors, how do you see a financial advisor fitting in to this change for our viewers and people who are thinking about retiring or are already retired,

Jordan Roach
I think you know, again, you always want to put some of the initiative on the individual saver to go do their education. But to me, what I would be doing is saying, Okay, I need a financial advisor to help me wade through all these waters, right? Because there’s a lot of tall grass through there to kind of sift through what works, what doesn’t work, get to understanding what their plan is, what their risk tolerance is, and how do these things behave, so they can build a, you know, very deliberate, thoughtful investment program for themselves. So I think there’s that partnership is going to be needed more than ever.

Ken Moraif
Yeah. And you know, as we record this, we have not had a big bad bear market in what 2008 was the last time. So it’s been almost two decades now. And so a lot of people probably think that those big bad bear markets don’t happen anymore. But I would say, Do you really think that over the next 15 years or 20 years, we’re not going to have another one. And if we do, how do you think these assets would react to that? Do you think that they would withstand the storm, or do you think they would go way down?

Jordan Roach
Yeah. And so, I mean, this is going to depend. And so you have one, you got to really understand, if we have a big, bad bear, you know, are these assets going to help us in that scenario, or are they going to hurt us? And so you look at something like, look at something like crypto, traditionally, from the from the from the ups and downs, we even had a big bad bear while crypto was really, yeah, right, yeah. But we have had certainly some down markets, and what we’ve seen is crypto goes down as the down markets happen. Okay, so

Ken Moraif
that works related to the market so far, amplify your downside. If you have a large sample, you know, if

Jordan Roach
you look at real estate, there are some bear markets. Real Estate holds up relatively well.

Ken Moraif
Y2K real estate held a very, very well. 2008 probably called it right. 2008 was, yes, the worst period ever right in real

Jordan Roach
estate and private credit assets. It depends so private credit could hold up. But the issue is, it’s kind of in a lot of times those assets are in a black box and you don’t know how they’re behaving. So the problem is, not necessarily the asset value is, can actually get to them? Because a lot of times what’s happening is we need money while everything’s selling off, and can I actually go get access to the things inside that vehicle? So that would be the problem that I would look at with that within that scenario.

Ken Moraif
So, you know, I think. Think there’s, there’s investor behavior is kind of interesting. I always remember this story that I tell where these two, two guys are sitting there, and, you know, they’re having soup together, and one of the guys gets a little salt shaker, and you put some salt in the soup, and he mixes it around. And the other guy goes, what was that? What’d you just do? And he goes, Oh, I put salt in my soup. And he goes. He goes, Really salt. He goes, You don’t know what salt is. He goes, No, I don’t try this. So the guy puts a little bit. He tastes it. He goes, Oh, this is good. So he Uncorks it, he pours the whole thing. And the guys go, what are you doing? He said, hey, if a little salt is good, a lot must be a lot better. So I think, you know, we have to be careful, even if this is good for you, you know that you don’t go overboard

Jordan Roach
with this. It’s the right dosage. It’s a medicine. So you have the right right dosage, the right we call position sizing, like academically, to understand how do these fit in? What is the right amount for me based on where I am and where I’m trying to be? So I think, you know, working through all of that’s gonna take a lot of education, a lot of time, hopefully, work with an advisor to see if these things do actually come online. Yeah,

Ken Moraif
and that’s actually so let’s look in your crystal ball. And so 10 years from now, okay, we’re gonna, okay, fly into the future. You’re looking back somebody adding crypto to their portfolio in their 401(k). Would that have been a good idea? A bad idea? What do you think?

Jordan Roach
I think 10 years probably point to point, with blinders along the way. Probably good. I think probably good, because I think it could help you navigate some outcomes that traditional assets maybe don’t navigate well. And I think where crypto could go, it could evolve from a growth asset to a currency hedge, right? Maybe. So I think it’s probably a good thing. The biggest concern I have with crypto, any of these other things, is going to be liquidity, visibility and transparency into what’s happening day to day, and making sure that, you know, investors do not get too excited under one theme and then load up. Yeah,

Ken Moraif
yeah. And I’ve been doing this long enough I remember when everybody loaded up on the.com stocks. Everybody wanted to be in technology, and then it went down 90% so that’s that’s on point. So ladies and gentlemen, hope you enjoyed this discussion. You know, one of the things that is so important in our view is to determine what is your risk profile when you’re deciding on how to construct your portfolio in your 401(k). And what I mean by that is, you know, let’s say that you have $10 million but your cost of living is $100,000 a year. Well, you wouldn’t, you don’t have to invest your money with hardly any risk to be able to generate that income that you want that 100,000 but if your cost of living is higher. Let’s say it’s, you know, six, 600,000 a year, or a million dollars a year. Now you got to be more aggressive with your investments to cover it. So the amount of risk. We have a philosophy that you should only take as much risk as is necessary to accomplish your financial goals. And what we want to do with prospective clients and existing clients is determine how much risk do you need to take, and then we can say, Okay, well, how much of these risk assets do we want to have in there? How many of these lesser risk assets? How about stable value? You know, what percentages do we want to have in all these things to create a portfolio that matches your risk profile? So always remember that when you are investing, you are in the risk business, and these things we talked about today are risk increasers, so be careful out there. So thank you for watching. I hope this video found you healthy, wealthy and wise, and we’ll talk soon