An Interview with James O’Brien from AltoIRA

February 11, 2022
15 minutes

This month, Jamestown Invest was excited to announce our partnership with Alto: now, you can invest in Jamestown sponsored properties or funds using an Alto streamlined process that can be done entirely online in minutes. We sat down with James O’Brien, Vice President of Partnerships at Alto, to explain how Alto works and how to get started.

Thanks for taking the time to speak with us, James. Can you start us off with a little bit of background on what an IRA is?

JO: An individual retirement account (IRA) is what’s referred to as a tax-advantaged savings account, although at Alto, we would probably call it a tax-advantaged investment account. Depending on the type of IRA you’re contributing to, you can put away a specific amount of money every single year. You can either write that off against your income for your current tax year, or not, depending on which type of account you choose. Then the gains that happen for the dollars within an IRA are not taxed. Imagine you invest $100 and every year you make $10 on that $100. You’re getting all of that $10 every year with no taxes taken out. However, there is a caveat: with a traditional IRA, you will be taxed on those funds when you start to take them out at retirement age, since a traditional IRA is funded with pre-tax dollars; if you use a Roth IRA, you won’t be taxed on your withdrawals because your contributions were made with after-tax dollars. You can set up either type of IRA with Alto (or both!). The tax provisions created in 1974 by a set of laws called the Employee Retirement Income Security Act (ERISA) made IRAs and 401Ks possible. Since 1974, people have been legally allowed to invest their retirement savings into alternative or non-publicly traded investments, but most people don’t know they can because they have a 401K or an IRA with one of the larger custodians and they only see the options those custodians choose to present.

How did Alto get started?

JO: Alto exists to allow people to invest in non-publicly traded options and things they may have expertise in like real estate, or startups, or cryptocurrency. We also exist because traditionally, if you wanted to invest your IRA in alternative options, it was a pain. It would take a lot of time and it was expensive. The fees and time didn’t make sense unless you were very wealthy. We launched with one partner in 2018 and now have over 20 partners we work with to streamline the IRA investment process. Another cool thing about Alto is that you aren’t limited to those partner platforms. If you have a friend with a startup raising money, or you want to buy a rental property, you can bring your own deal to the table and invest your IRA in that opportunity through Alto. As a custodian, we don’t give investment advice, or tell you whether a deal is good or not, but we provide a streamlined solution for you to invest your retirement dollars where you see fit.

And how has Alto changed that process?

JO: We built technology rails for easy, secure data and document transmission, and for customer communications so people can get in touch with us easily and frequently. On top of that, our platform has sides both for companies raising money as well as the individual investor. Through Alto, the company and the investor meet in the middle and have an easy, single place to communicate, share documents, and collect signatures. That way the burden of investing isn’t placed on one party or the other. We also have a suite of APIs that allows any funding platform to integrate our services as a “Pay with my AltoIRA” button within their flow. Investing with an IRA is relatively complicated when it comes to compliance regulation and legal needs. The technology allows us to take care of that so that the companies and individuals don’t have to be experts on these topics. Companies can choose to accept capital from an investor using an IRA, investors can use their IRA dollars as they see fit, and then we take care of all the rest.

What are the steps for getting started?

JO: It’s pretty simple! Go to altoira.com and click the sign up button, enter your name and email address, create a password, and then submit to create your account. We then verify your identity with some additional personal info, and then you choose whether to set up a traditional or a Roth IRA. It’s all entirely online, there’s no downloading or uploading PDFs, and it takes less than five minutes. After your IRA is set up, you go to jamestowninvest.com and choose “Invest AltoIRA” in the signup form and the Jamestown Invest team takes it from there.

Why might it be a good idea to invest your IRA in alternative investment vehicles?

JO: Some funds, firms, and institutions, such as pension funds or large endowments for colleges or family offices, traditionally have had anywhere between 20-50% of their invested assets in alternative, non-publicly traded vehicles. They typically return better year over year than somebody who’s only invested in public market opportunities. We’re not an investment advisor, so we don’t recommend that people put any percentage of their retirement savings into alternatives, nor do we recommend individual alternatives, but the data does show that if you take your retirement dollars and create a diversified portfolio of alternative asset investments alongside your public market investments, you could potentially perform better in the long-run. You could also be hedged against public market downside and volatility because a lot of alternative assets tend to be either entirely illiquid for a certain amount of time or pretty illiquid, with quarterly or yearly redemptions, etc., so there’s not as much price fluctuation like you might see in the public markets. It is important, however, to keep in mind, with any investment, an investment, even through your AltoIRA is speculative, illiquid and involves a high degree of risk, including the possible loss of your entire investment.

by Jamestown Invest

Jamestown Invest is a direct-to-consumer platform, connecting U.S. individuals directly with real estate managed by Jamestown.

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