Artivest, the technology-driven platform for alternative investments, conducted a survey of 163 financial advisors and registered investment advisors (“RIAs”) at the 2016 Morningstar Investment Conference, which was held June 13-14 in Chicago. Respondents said they considered alternative investments “key” to growing their business with high-net-worth (“HNW”) customers, but they cited a “lack of access to quality products” as the main obstacle “standing in their way.”
Many RIAs Under-Allocated to Alternatives
Fifty-four percent of respondents said they believed offering alternatives was crucial to retaining and attracting HNW customers, and 73% said alternatives should constitute more than 5% of their clients’ portfolios. Among this 73%, a plurality of 43% said they thought an allocation of 15-25% was most appropriate, but according to a May 2015 study from J. Benjamin, the actual level of current allocations is in the 5-10% range. What accounts for the disparity?
Lack of quality products was cited as the number-one answer, with 26% of respondents listing it as the biggest challenge. But there were several other popular answers, too: Twenty-two percent said higher retail client fees were the main problem, while 17% cited the length of time to identify and select managers, and 10% said account paperwork and cumbersome administration kept them from allocating as much as they’d like to alternatives.
Increased Demand for Alternatives
“We have seen an increase in demand for alternative investments from high-net-worth investors, and this survey confirms that advisors recognize the value of incorporating alternative investors in a client portfolio,” said James Waldinger, Founder and CEO of Artivest, in a statement. “As demand continues to grow, there is a clear need for greater advisor education around the vehicles available to access real, high-quality alternatives in a more efficient way.”
Not surprisingly, the survey also found that 90% of respondents believed technology was vital to attracting younger HNW clients from the millennial generation.