RIA Trend Report: Reasons to Advocate Use of Alternatives

RIA Trend Report: Reasons to Advocate Use of Alternatives

Best Practices of Top RIAs

The top firms are slightly more inclined to advocate the use of alternatives within client portfolios; only 17% of top RIAs report not using alternative investments compared to 27% for the others. While both consider diversification benefits as a key reason to use alternatives, a greater percentage of the top firms cite other reasons as well. Specifically, the top RIAs more likely to advocate alternatives to lessen portfolio volatility and as a risk management tool. Given that the top firms have a greater level of AUM, it is very likely that a higher percentage of their clients are primarily concerned about preserving their wealth. Superior return opportunities and client request are both cited by relatively small percentages of advisors across both cohorts. Overall, it appears that advisors 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 11: Expected Change in Usage of Alternatives

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