The SEC would modernize the investing structure and product registration of alternatives, bringing fresh opportunities to financial advisors

New SEC alternative investment regulations would boost investor participation, according to a new report. The SEC’s revamp would be a boon for financial advisors who have already seen increased demand in this space.

Lawrence Calcano, CEO of iCapital, says SEC may also lower the eligible net worth limits for investors to qualify for alternatives. iCapital is the $40 billion alternatives platform that claims Fidelity and Morgan Stanley as clients.

New SEC alternative investment regulations will bring more high net worth investors

“Frankly, I can see the SEC changing the rules, so that accredited investors ($1 million in assets or more) [can] invest in what qualified clients ($2.5 million in assets) [can] buy,” Calcano said.

There are two primary challenges for most advisers. First, they may lack adequate experience in the alternative investments field. Second, they may lack an understanding of many asset types.

Those advisers with the required expertise could gain a huge advantage from the new regulations and their broader scope.

For others, not so fortunate, education is the only solution, and that is a factor that should be considered by the SEC.

Responsibilities of advisers

“Investors today are quite interested in alternatives exposure,” said Calcano. “What that means is that advisors have to solve for many things at once—finding the best funds and completing due diligence to make sure they are best of breed, solving for operational management of those funds and in many cases obtain access to the funds—which in many cases require a minimum investment of $5 million, $10 million or even $20 million.”

iCapital

iCapital can pool resources from high net worth individuals. They can also apply these to deals such as those available to institutional investors. As of March 31, iCapital had assets under management of about $40 billion across more than 100,000 client accounts.

Finally, in April this year iCapital said it would enter into an exclusive arrangement with The Nasdaq Private Market (NPM) to create an integrated secondary marketplace for iCapital-sponsored funds.