All-Channel Trend Report
Part 8: Reasons to Advocate Use of Alternatives

Part 8: Reasons to Advocate Use of Alternatives

Section 4: Best Practices of Top Advisors

The large firms are slightly more likely to advocate use of alternative investments within client portfolios as only 19% of the large firms report that they don’t use alternatives, which compares to 27% and 26% for the growing and other firms, respectively. When we examine the responses more closely, we note that the predominant reason for advocating alternatives across all three firm categories is for portfolio diversification. However, diversification is favored by a higher percentage of the large and growing firms relative to the other firms. In addition, half of the large firms report using alternatives to reduce portfolio volatility and as a risk management tool. Another interesting finding is that 19% of large firms advocate alternatives for superior return opportunities, compared to only 14% of both growing firms and others. Overall, it appears that advisors only get comfortable advocating alternatives for client portfolios after achieving some level of scale and growth, which may also be correlated with having had sufficient time to educate clients about the use of alternatives. 

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Next Part 9 of 10: Expected Change in Usage of Alternatives

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