WSJ Survey: Financial Advisor Attitudes on Retail Alternative Investments
Our latest WSR survey of registered readers reveals continued doubts among financial advisors about retail alternative investments
When you’re in your mid-fifties, living in a mid-market rental apartment, watching the world go by in Phoenix, Arizona while waiting for excruciating levels of summer heat, it’s easy to start questioning all the life decisions that brought you to where you are.
From this perspective, it can be personally comforting to hear about a topic – any topic – that makes other people feel hesitant. In this case, it’s the latest WSR Reader Survey on financial advisor attitudes to retail alternative investment solutions.
And when it comes to hesitation, there are pauses a-plenty among a large segment of independent financial advisors!
Here are the key summary findings:
- The segment of independent financial advisors who feel the most hesitations about retail alts are professionals with $100 million to $1 billion in total client assets
- 57% of this financial advisor segment feels “very strongly” about “completely avoiding alternative investments in favor of a traditional 60 / 40 portfolio”
- The top three most frequent recurring concerns cited among these financial advisors include the perception of heightened regulatory scrutiny on advisor compensation related to retail alt products; perception of inflexibly high net investment minimums; and worries about locking up too much liquidity for their clients
- Close behind these concerns is the complexity created from a reporting standpoint when so many retail alts are “off-statement,” or not included in performance statements from a major custodian or broker-dealer, requiring separate reporting and manual aggregation on the advisor’s part
- Further down the list of concerns? A perception, as noted by one survey respondent, that “The best illiquid asset deals are already earmarked for the UHNW segment.”
I get it. As I’ve been told by my colleagues on the WSR team, none of these key findings are necessarily new, and I agree.
But it’s 2021, the interest rate environment makes the hunt for yield pretty much impossible via traditional equity and fixed income products, many Boomers have been forced into early retirement courtesy of pandemic-driven economic disruptions and severe market volatility continues to be a fact of daily life.
With big picture conditions being what they are, retail alts should be even more popular than they are today as something financial advisors can offer to their clients.
Granted, retail alts providers have been making meaningfully greater headway over the past few years with solutions outside of the usual non-traded REIT product, especially leveraged loans, private equity and hedge funds.
But clearly much more work needs to be done among retail alts providers in terms of education, advocacy and customization of products with professionals focused on the mass affluent segment of retail investors.
Retail alt companies that can crack the code with this segment of financial advisors could be especially well-positioned for future growth.
James Miller, Contributing Editor & Research Analyst, Wealth Solutions Report, can be reached at ContributingEd@wealthsolutionsreport.com