3 Reasons Alternative Investments May Be Your New Key to Success in Changing Times
For some, recent headlines have been unwelcome harbingers of changing tides in the advisory business, many of which are rooted in the DOL fiduciary rule.
News has finally been trickling out about how the new rules will actually impact “business as usual” for commission-based firms, and major brokerages have announced huge policy changes as a result. Some are opting to maintain commissions for retirement accounts. Others are shifting to a 100% fee-based environment. Some are even taking commission IRAs off the menu completely and banning the use of mutual funds in IRAs altogether. Another fallout is that broker-dealers and product distributors are already dramatically reducing the numbers of products available to advisors, and some are eliminating all commission-based products.
It’s a radical transformation that’s bound to impact not only your business model and how you work with your clients—but also your ability to compete in a playing field where an unprecedented number of advisors are abandoning the stability of working for a large wirehouse and opening up shop as independent advisors. As the industry as we know it continues to shift, there are three big questions to answer: How can you adapt your business model to deliver solutions that support your clients’ needs; how can you set yourself apart from your competition; and, on top of it all, how can you ensure the profitability and sustainability of your practice?
The answers are not simple, and while there’s no single solution, many advisors are finding that there is one approach that can help address —at least to some degree—all three challenges: Alternative investments. Here’s why alternative investments may be an answer you’ve been looking for:
1: Alternatives can help you stand out in a crowded playing field.
Whether you are battling brokerage firms, the “guy down the street,” or robo-advisors, one way to stand out from the crowd is to deliver clear, tangible value to your clients. First, alternative investments are an important diversification tool within your clients’ portfolios. Second, they’re simply not on the menu at most larger brokerage firms—or on robo-advisor platforms. Plus, many of the advisors you compete against may shy away from the research required to analyze and select appropriate alternatives. If you’re willing to do your homework, alternatives may just be the differentiator you’ve been looking for.
2: Alternatives are well suited to today’s market environment.
Low interest rates, high volatility, and an aging bull market have many investors wondering if it’s time to rethink a passive, equities-based approach to retirement planning—especially if higher yields are needed to reach their investment objectives. Because alternatives are positioned to generate returns in rising and falling market environments, a more active approach to portfolio management that leverages alternatives has the potential to help increase returns. Plus, when combined with multiple asset classes such as stocks, bonds, currencies, and commodities, alternatives may help provide the all-important diversification element that your client’s portfolios require.
3: Alternatives can open the door to conversations with your clients.
The days are gone when you could “set and forget” your client relationships—much less your clients’ portfolios. Alternatives offer a great reason to reach out to existing clients and have a new conversation. And initiating that conversation is one of the most important actions you can take to re-establish yourself as your clients’ trusted advisor. It can assure them that lower-cost or even free investment advice that they may be considering does not provide the guidance they need to achieve their goals.
For tips on talking to your clients about alternative investments, please read my colleague Jason Plucinak’s article, “3 Tips for Talking to Clients about Alternative Investments.”
Of course, alternative investments aren’t the only answer to managing the storm of change across the industry, but by including alternatives into your client portfolios, you may be able to create the portfolio return and the client differentiation you need to stand out in a ever more crowded playing field. Now is the time to research the options, determine which alternatives make the most sense, and then start the conversation with your clients. Your clients will value your active guidance and, ultimately, your proven dedication to helping them achieve their investment goals. That, in the end, is every advisor’s key to success.
Most Read IRIS Articles of the Week (February 20-24)
Here’s a look at the Top 11 Most Viewed Articles of the Week on IRIS.xyz, February 20-24, 2017
Click the headline to read the full article.
Becoming cyborgs is the way to go for financial advisers…blending robotics and humans into one organism. You see, I am convinced that robo-advice models will succeed and prosper. — Tony Vidler
With the global economy warming up, but political uncertainty remaining a constant, it’s more important than ever for investors to position their global portfolios to navigate long-term market volatility. That’s where the power of diversification comes in ... — Yazann Romahi
The financial world is noisy and it’s easy to become distracted from your most important long-term goals. One way to cut through the noise is to focus on just the two factors that ultimately determine your approach to everything else in your financial life; namely, Market Risk and Shortfall Risk. — James E. Wilson
It’s important to admit the truth behind our actions in order to rectify past and future mistakes or regrets. Living in denial only perpetuates making decisions that could potentially lead to financial disaster. — Michael Kay
There's one key approach that makes you invaluable to your clients so they want to stay with you for the long-term. You have to genuinely be interested in people. — Paul Kingsman
When you start dating, you usually start off sharing stories. Tales of your childhood, your previous relationships and your college days. Those stories help explain to your partner who you are and how you act. — Mary Beth Storjohann
It runs counter-intuitive to what we have been led to believe business is all about: make more money and everybody wins, surely? Talk about revenue so that everyone knows what’s important. What’s the problem? — Barry Chandler
In the wake of President Donald Trump’s stunning upset victory, however, muni investors were forced to readjust their expectations of fiscal policy going forward. Because Trump had campaigned on deep cuts to corporate and personal income taxes, equities soared while munis sold off, ending a near-record 54 weeks of net inflows. — Frank Holmes
What does it mean to be a customer-centric company? That seems to be the question of the week. It started off with one of our subscribers emailing in the question, followed by two reporters wanting my take on this now-popular phrase for their interviews. — Paul Laughlin
Everywhere I look I see organizations and people investing heavily in new initiatives, transformation, and change programs. And in almost every case the goals will never be met. One of the most crucial causes of the failure? The right questions were never asked at the outset. — Paul Taylor
Why should we think the head of a private equity company could effectively “fix” US Intelligence? It is not apparent that this individual is even remotely qualified to fix the US intelligence apparatus. — Kathleen McBride
- 1 of 897