In a live session "Mastering Alternative Investments: Onboarding & Educating Advisors," asset and wealth management experts shared insights on effectively integrating alternative investments (alts) into financial advisory practices. The discussion, center stage at Nicsa’s 2024 Asset & Wealth Management Summit, focused on democratizing access to alts, the importance of specialized education for advisors, and practical strategies for portfolio construction.
Kirsten Pickens, Managing Director and Co-Head of U.S. Distribution, FS Investments moderated the discussion among the following panelists:
Joanna Berg, Director, Sr. Alternative Investments Strategist, BNY Advisors
Adam Pennacchio, Executive Director, Alternative Investments, Morgan Stanley
Claire Sawyer, Program Manager, UniFi by CAIA™, CAIA Association
Here are the key takeaways.
Democratization of Alts
Once exclusive to large institutions, alternative investments have undergone significant evolution. The expansion of asset classes and innovative investment platforms has made alts accessible to a broader audience, including retail investors. This shift is fueled by the increasing number of companies choosing to stay private, creating unique opportunities in private markets.
Challenges in Alts Adoption
The traditional 60/40 portfolio model has been underwhelming, prompting advisors and clients to seek diversification through alts. However, many advisors lack the comprehensive understanding needed to effectively communicate and implement these strategies, highlighting the need for targeted education.
Specialized Education Platforms
The launch of platforms aimed at providing foundational knowledge across the alts landscape reflects a commitment to industry-wide education. These platforms help advisors understand the role of alts in achieving client goals and equips them with the necessary tools to navigate complex conversations with confidence.
Goal-Based Approach
Educating advisors on the integration of alts requires a goal-based approach. By framing alts as solutions to specific client needs—such as income enhancement, growth, or tax efficiency—advisors can better align these strategies with client objectives. Tailored educational content sets help break down complex strategies into accessible, goal-oriented solutions.
Differentiating User Groups
Educational efforts must cater to varying levels of expertise among advisors. For newer users, foundational knowledge is crucial, while power users benefit from in-depth understanding of sub-strategies and nuanced portfolio construction techniques. Addressing these diverse needs ensures a comprehensive educational experience.
Innovation in Fund Structures
Innovative structures like interval and evergreen funds have simplified the integration of alts, making them more accessible for advisors. These structures address liquidity concerns and streamline the investment process, reducing administrative burdens and enhancing scalability.
Customized Roadmaps for Clients
Advisors are encouraged to provide clients with clear roadmaps for their alts investments. This includes outlining cash flow expectations, commitment levels, and target allocations. Such transparency helps clients understand the long-term value of alts and positions them for sustained investment success.
Support Staff Education
Educating support staff is critical to streamlining the implementation of alts. When support teams understand the intricacies of alts, they can effectively assist advisors, reducing resistance and improving overall execution.
Conclusion: "Mastering Alternative Investments: Onboarding & Educating Advisors" shed light on the transformative potential of specialized education in expanding the adoption of alts. The session underscored the importance of democratizing access, providing goal-based education, and leveraging innovative fund structures to enhance portfolio construction. By equipping advisors with the right tools and knowledge, the industry can effectively integrate alts into financial advisory practices, delivering diversified and tailored investment solutions to clients.
Nicsa remains at the forefront of fostering innovation and collaboration among professionals in the industry. We invite you to join us at our next event, where you'll have the opportunity to engage with industry leaders, explore cutting-edge technologies, and gain valuable knowledge to drive your business forward. Don’t miss the chance to be part of our dynamic community shaping the future of asset and wealth management: SLF2025