A Curb-Cut Approach to Better Returns

Are you being shut out of the full returns of the market?

Unless you are in the top-tier levels of wealth, you probably are. Even individuals with high levels of net worth cannot access the sum total of investment strategies our economy has to offer. Working with financial advisors at JECohen that consider all potential options for your unique situation can help you not miss out on high-return investment opportunities.  

To access private investment strategies, such as private equity, real estate, or venture capital, investors must achieve a special accreditation. There are three broad types:

  • Accredited investor: Broadly speaking, this is an investor with a family net worth of around $1 million, not including your primary residence.
  • Qualified client: A net worth of $2.2 million, and at least $1.1 million under management.
  • Qualified purchaser: A total investment portfolio of over $5 million.

The more wealth you have, the higher the level of accreditation you get, and the greater access to investment opportunities you receive. 

Securities law has set up these categories because, in theory, the government wants to limit risk exposure to investors with fewer means. Those with higher assets can more easily absorb potential losses. Therefore, they can participate in private investment strategies like real estate transactions or private equity without fear of losing their entire livelihood. 

While well-meaning, these protections are based on a misguided notion of risk. Many of the private investment strategies deliver higher returns with limited daily volatility as compared to the public market. The average stock market return is about 7%, but real estate returns typically get you 10%, private equity returns typically get you 15%, and venture capital investments can get you as much as 28%.

Unfortunately, these kinds of returns are not accessible for most investors. Your average investor cannot buy a building, for example, or join in on a private equity fund. They cannot take a venture stake in a fast-growing company. In addition to the regulation restrictions, the process for doing so is too expensive to justify the tens of thousands of dollars or even hundreds of thousands of dollars that most people have to invest. These asset classes work at the scale of millions of dollars.

Even if someone has this level of wealth to invest, without the right connections or guidance, the investor may not be able to unlock these returns. If you do not know someone who has invested in real estate or private equity or venture capital, it is unlikely you’ll be able to do so with any fidelity.

At JECohen, we embrace cutting-edge investment strategies, tailored to meet the unique needs of our clients, which allows them access to any investment strategy that would help them meet their investment goals.

But what do these barriers mean for the average investor? They are shut out of the complete range of the market, while the richest have opportunities to accumulate more wealth. This isn’t capitalism–it’s oligarchy. We are allowing the rich to get richer as long as those who have a little can get a little more. 

These barriers exist for everyone, not in the top echelons of the economy. What do we do about it? We can design strategies that help those who need it while also helping grow the economic potential for all.

A model comes not from investing, but public policy. It’s called the “curb-cut effect,” named after the wide-spread adoption of curb cuts on sidewalks. Originally, no sidewalks had these down-sloping options at street corners, which made it very difficult, if not impossible, for people with impaired mobility to navigate streets. Soon, towns and cities began to install curb cuts to support those in wheelchairs and others with limited mobility, which dramatically improved their quality of life. 

But something else happened: Not only did this intervention support these marginalized groups, but it helped everyone. Parents with strollers had an easier time. Fewer people accidentally tripped into the street. What was designed to help one group ended up helping everyone. 

We can take a similar approach to financial and wealth management. We can knock down existing barriers for the average investor to democratize an approach to investment.

This includes strategies such as: 

  • Individual equity investments: Many wealth managers have come to rely on passive equity strategies such as ETFs. At JECohen, we employ an active approach, seeking out and investing in undervalued companies for the long-term can provide a tremendous boost to your returns.
  • Private real estate investments: By lowering the minimums required to invest, many people can become a real estate investor. This helps increase returns and wealth by offering protection from inflation, less market volatility, a steady and reliable income source, and portfolio diversification.
  • Venture capital investments: JECohen is offering our clients an opportunity to invest in Corridor Ventures, an early-stage venture capital investment firm that will enhance venture capital in the U.S. Southeast, a woefully underinvestment geographic area. Any individual will be able to invest as a general partner (or “GP”) within the fund, taking active positions in the investment companies, rather than the typical LP (or “limited partner”) role that most investors take in the VC fund. 

Using this democratized approach to investing, we are able to unlock these higher levels of returns for our clients because we make it personal and use different strategies than what’s typical. 

Join us and find out how we can do the same for you.

Interested in discussing this topic further or inquire about our services and investment opportunities? Reach out and contact us to start the conversation here.

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  1. https://www.forbes.com/advisor/investing/roi-on-real-estate-investment/
  2. https://www.titan.com/articles/private-equity-returns
  3. https://www.cambridgeassociates.com/insight/us-pe-vc-benchmark-commentary-first-half-2022/