Friday, February 19th, 2016 and is filed under AI Insight News
Retail and institutional investors turned to Alternative Investments last year for increased portfolio diversification, income benefits and the opportunity to invest in assets that are non-correlated to the traditional stocks, bonds and cash investments.
Between now and 2020, alternative assets are expected to grow to as much as $15.3 trillion on the strength of friendly monetary policies and stable economic growth, according to a PricewaterhouseCoopers (PwC) study.1
“We anticipate that alternative assets will likely comprise 15% of client portfolios within the next five years as investors become more sophisticated and demand greater strategic variety in their portfolios,” according to PwC.
With the increased interest in Alternative Investments also comes the need for increased program-specific training and education by advisors.
Alternative Investments Growing in Popularity
Among the Alternative Investments growing in demand with retail investors are “master limited partnerships, real estate investment trusts, business development companies and special purpose acquisition companies,” according to a Pension & Investments article.2
Other types of complex products growing in popularity include closed-end funds, hedge funds, managed futures and private equity funds.
“Individuals appear to recognize challenges presented by today’s markets, and are open to new approaches,” according to a recent Natixis study.3 “In fact, 69% say they believe a traditional stock and bond portfolio is no longer enough to pursue returns and preserve capital.”
Advisor Education Key to Success and Growth
According to a Pershing study on liquid alternatives, “advisor education is the key to success and growth.”4 We need to educate the advisor community before it gets to the client. Alternative Investments could be the right types of strategies and structures for the retail high net worth or other client types.
Another Pershing study on advisor perceptions of Alternative Investments emphasizes that “access to knowledge is a big issue for advisors” and that a barrier to entry for Alternative Investments could be a “possible lack of education and training.”5
Aside from heightened scrutiny of complex products from regulators, advisors need to thoroughly train on offerings to best match investments to client objectives. Starting with assessing suitability, complex products can also come with a new set of due diligence, marketing and liquidity risk management requirements.
Increased Knowledge Can Lead to Increased Referrals
As advisors deepen their knowledge of Alternative Investments through program and sector research and training, the benefits add up quickly. By increasing their proficiency around Alternative Investments, advisors can build their credibility which may lead to increased client referrals.
“Clients may remain loyal to their advisers when returns are excellent, but in most economic environments (and especially today) what they really want is a richer adviser-client dialogue,” reports InvestmentNews.6
As market uncertainty continues into 2016, it appears that Alternative Investments continue to grow in popularity. Advisors who can demonstrate advanced competence around complex products will stand out from the competition this year.
If you are thinking about offering Alternative Investments to your clients, start with a subscription to AI Insight. You will quickly and efficiently build your credibility around complex products. Contact us at 877-794-9448, x715, to learn more!