Investors are focused on loss prevention and risk mitigation. In the survey, they named “protection from losses,” “reducing volatility” and “diversification” as areas they would like to concentrate on in discussions with their financial professionals.
The need for education
Financial professionals and their clients are searching for ways to navigate today’s challenges, especially as many investors are nearing or in retirement. Alternative investments may help – and our recent survey shows both are interested in alternatives. However, financial professionals and investors also said they need a stronger understanding of how to use alternatives in a portfolio to have better conversations on investing in alternatives.
Financial professionals aim to increase client allocations to alternatives from 5% to 10% over the next 3 years and the number of products used from 4 to 6.
Investors are open to alternatives and financial professionals believe alternatives can help meet investor needs. Yet conversations between the two about alternatives aren’t taking place.
The largest impediment to more productive client conversations about alternatives is likely a knowledge gap. Financial professionals disclosed they need more education on alternatives and believe their clients do as well.
Conversations between financial professionals and investors should focus on explaining “why alternatives” and portfolio applications for various asset classes and strategies.
Our white paper discusses how enhanced education can help clear up misperceptions and false assumptions financial professionals and their clients have about each other’s views on alternatives.