Brian Dally: Well, I know that the world of investment companies and investment advisors is changing a lot. There's so much happening in this space, and not all of them are bravely going into this world of alternative investments and private market alternatives. It sounds like you [00:04:00] are ahead of the curve on that. Is that what makes Bequest unique or better than its competition? How would you position it against what else people might think about if they were going to work with somebody to invest their money?

Shawn Muneio: Yeah. There's a lot of choices out there, especially in the alternatives. One of the big missions that we have here at Bequest, and we uncovered this and I think you pioneered we realized four years in that we wanted to provide alternative options for anybody, whether you're accredited or not. In fact, we began our investment strategy just meeting the needs of accredited investors because that's all we thought we could meet. In fact, went down the Reg D and the 506(c) route and began raising capital for accredited investors. And it wasn't until about four years in that we [00:05:00] realized there was an untapped market of folks that may not be accredited, still looking for higher returns, still looking for the alternative investments that the wealthy have access to today. We went on a mission to try and figure out how to bring those products to the market, and to stumble upon regulations that I think you helped pioneer, to help us get where we wanted to go.

And so over the last two years have transitioned more to an investment strategy for the folks that are underserved, we believe, for the 99. And so that's really what differentiates us, really taking these alternative investments to folks who have, for many, many years, in fact, never had access to products like this, and really leaning into that institutional grade assets that are available to [00:06:00] the 99, the folks that don't have the high net worth, don't have the access to some of these asset managers who only let in the ultra wealthy.

Brian Dally: I think access is a big theme. It's certainly something that we cared about, and we thought it would build a better company and help build a better world. And hopefully we're both helping to deliver that. I think there are more people realizing that access is a good play.

But you've actually gone beyond that, because I understand you built Bequest around four principles: cash flow, control, community, and comprehension. So that's intriguing. Those are four Cs that are really intriguing. Can you take us through them, and why do you believe they're the foundation for building wealth differently?

Shawn Muneio: Well, I think you start with the first one, and that's cash flow. In today's [00:07:00] world, there's a lot of investment options out there. You can look at the public markets. But if you look at the demand, the need, what's going on today and what has been going on for the past couple years is investors, certain investors that are in certain stages of life, are looking for cash flow. They're looking to generate cash flow. And so our investment strategy has always been... That's why we live in the private credit world, is, helping investors meet their cash flow needs. They could have been investing for alpha for many, many years, and they're just at a certain stage of their life where they just, they want cash flow from their investments, and they don't want to have to be selling their assets every quarter or every month to help pay the bills, to help support the lifestyles that they have.

And so we've focused everything that we do on attempting to generate [00:08:00] cash flow for our investors, which means there's certain types of assets that we invest in, certain types of deals that we get involved in, that have to generate cash flow. And so I think that's a huge differentiator for us. If you look at the public markets, it's really hard to generate cash flow. And we do that mainly through buying junior liens. We buy second liens off the secondary market, and we buy pools of those mortgages, and we use that cash flow to meet those needs for our investors.

And then you move into the other C word, control. We want to make sure that when we buy these portfolios of assets, that our team has complete control over them, as much as you possibly can. And there's third parties that we have to hire to help service the debt. But at the end of the [00:09:00] day, we own the mortgages. We've recorded the assignment of that mortgage in whatever local county that that loan was originated in, and so we have full control of the assets. And so this is not a, we're going to invest in some other operator and hope that they deliver the return that our investors expect. We do have full control over the assets.

And then we invest in things that people understand. We want it to be simple. A lot of people understand that they need a house. They understand that people need a mortgage to buy houses. They understand that people pay their mortgage, and so it's very simple what we invest in. It's not some quant trading strategy. It's very understandable.

And then we also believe that the type of loans that we buy off the secondary market has an impact to the community, the [00:10:00] areas that we buy and invest in. And so those are the four Cs that we focus on, and it's been good to our business.

Brian Dally: So, thanks for taking us through that. I think that is a different take on how to invest in private markets or alternatives, so I think, good work on that. I can identify with at least three of those Cs, if not all four.

So, turning a little bit toward something you said about cash flow and not really wanting to sell assets. I mean, for decades we've been told to save, invest, and build a big enough portfolio to eventually live off those investments, and one assumption of that strategy that I think is coming under some pressure is the 4% retirement withdrawal rule. Do you think that's still a reliable rule, and do you think investors may need to rethink it?

Shawn Muneio: I do. I do think that, [00:11:00] at the end of the day, many, many investors that we come across really have no strategy for cash flow. When they see us and they see folks like Groundfloor, they understand that, "Hey, I can actually generate cash flow from my portfolio, and I don't have to go in and cut a piece of the apple tree down, in order to survive."

And so, I do think there's a different strategy here. I do think that a lot of people, when they were building their portfolios years ago, they thought that that 4% was going to be enough for them to live off of. And today, with today's inflation, and hoping that we're getting it more and more under control, that's probably not the case. There's more that is needed from these portfolios. And so I think a lot is breaking down there. A lot of advisors probably didn't see this coming, and [00:12:00] hopefully it changes. We don't know for sure. Investors need more to live off of.

Brian Dally: If you think about it, most dividend stocks don't yield 4%. And so if you're just allocated to the stock market, and maybe had some bonds in there to generate a little bit more income, to get to 4% in this day and age with such low dividends out there, you're either constrained to a very small number of equities or you're going to have to sell assets to reach that 4%, which the more assets you sell, you've got to pay the tax man. So, it's sort of recursive. So I get it.

And so, the answer to that is, cash flowing alternatives, because that generates more than 4% and you can actually meet that 4% target or you can dip in 6% or 8% and maybe still have money left to continue to build your base.

Shawn Muneio: Yeah, absolutely. That's the strategy that many [00:13:00] investors are flocking to right now, and it's why we've been able to grow assets.

Brian Dally: And to your point, the tools, or the investments, that deliver that kind of return really haven't been accessible to the 99%. If you have a private wealth manager, and $10 million under management or something with them, you can get that. But most of us don't have that.

Shawn Muneio: Exactly.

Brian Dally: Yeah, I get it. All right. Well, this has been a great start to our conversation. We're going to pause here. And when we come back for part two, I want to get into the FIRE movement. I think most of our listeners probably know what that is, but we'll make sure everybody is on the same page. And I want to understand more about the forgotten investors of America. So, everybody stay tuned for episode two. For our audience, you can connect with Shawn via his LinkedIn, which we'll include in the show notes, or you can visit bqfunds.com.

Check out all episodes of our podcast at groundfloor.com/podcast. And if [00:14:00] you like what we're doing, please like and subscribe so that more people find out about it. And I want to thank you again for joining us on Beyond the Stock Market. ​