Trending
Written by: Deshawn Peterson
From my discussions with independent advisors, alternatives are being considered more and more. What was once nice to have given the historical context that private markets were usually only accessed by institutions and the most sophisticated clients, advisors didn’t have a need nor demand to implement these solutions.
Within recent cycles, this is no longer the case. With a client having more access to information if not the same amount as their advisor due to innovation, mobile phones, and other disrupted channels of information, clients are demanding more from their advisors. Alts are one of those expectations.
I want to thank Cerulli Associates for their research. If you're interested, you can get it here: Adapting to Growing Private Markets: A Playbook for Practice Success
26% of all advisors, report alternative investments as a differentiating factor.
Top reasons for offering alternative investments:
- Differentiators
- Attract HNW clients
- Consolidate Assets, Greater wallet share
- Retain
The above stats are all items that aren’t factoring in the investment component. 1 in 4 advisors are using alternatives to stand out. Are you the 1 or the other 3?
My experience with advisors is that alts are now table stakes. It’s a must to, at a minimum, become a subject matter expert or partner with a firm or someone who is i.e. OCIO, Consultants, or hiring a private markets specialist.
Advisors are entrepreneurial in their rawest form. There’s no limit on clients or the # of assets that you advise on. It’s the best advisor who serves their clients the best wins. But they are also aware their competitors are also calling on their clients. I am not saying that not offering alts will sever the relationship, but it does allow someone else to fill the gap. We know that HNWI individuals are being prospected but bankers, brokers, fund managers, other advisors, subscription services, accountants, and more are all vying for a piece of their wallets.
44% of advisors found one of the top hurdles includes overcoming administrative requirements
It’s more than learning about the investment and fund sponsors themselves, advisors must consider how it’ll affect their practice management.
- Do you have the internal infrastructure or enough staff?
- Who has experience in implementing these solutions?
- Are we educated enough internally and for client-facing discussions?
There’s a lot that advisors have to consider for alts but the time that was once a luxury is gone.
Related: What Really Sets Advisors Apart