Nearly half of respondents (49%) reported that managing due diligence was their most pressing challenge around incorporating alternative investments into client portfolios. Wealth management firms typically have manager research and monitoring teams strictly focused on researching alternatives managers and strategies. “The challenge is that’s a huge cost,” says Loughrey. “Only the largest wealth management firms have the scale to employ dedicated due diligence teams.” Smaller firms often rely on third-party research, he says.
One in three (30%) advisors reported access to alternative funds and investment products as a pressing issue. “Access to funds has long been a challenge,” says Loughrey. Alternative funds may be capped with finite allocations available. What’s more, alternatives aren’t necessarily custodied like a mutual fund or ETF, so wealth management firms need access to these investments via specialized platforms or direct contact with an alternative investment manager.
Respondents gave equal weight (roughly 20%) to data reconciliation and validation to ensure quality control, reducing the cost of manual work, document management, storage and access.