Advisors need alts education … but what training do they want?

Advisors need alts education … but what training do they want?
Alternative asset managers weigh in on the most valued types of education for financial advisors.
AUG 23, 2024

While asset managers and private market fund providers continue to make a strong case for alternative allocations in retail portfolios, the fact remains that advisors will be the main gatekeepers to determine if, when, and how their clients will gain access to non-traditional asset classes and strategies.

Of course, getting a client invested in private equity or a hedge fund is not a trivial thing. While any advisor worth his salt should be well acquainted with their client’s goals, risk appetites, and overall financial situation, that only gets them halfway at best to determining the suitability of an alternative investment.

The other big piece, of course, is understanding alternatives. Which means that even as private market giants see the space evolving into a $65 trillion opportunity by 2032, asset managers are well aware they still have to do the groundwork of educating advisors, according to recent research by Cerulli.

According to its recently published report on US Alternative Investments, the need to educate advisors on alternatives is among the top challenges asset managers face in expanding the opportunity to the retail market, along with low allocations through home offices and an inadequate distribution force.

By 2028, Cerulli estimates financial advisors in the US will have $2.5 trillion allocated to less than fully liquid alternative investment assets, an almost 80 percent increase from $1.4 trillion currently.

When asked to identify the types of education financial advisors value most with respect to alternatives, a vocal 77 percent majority said baseline education at the asset class level was the most sought-after training. After that was portfolio construction guidance, cited by 69 percent, and education on discussing alternatives with clients, which 54 percent of respondents identified.

While asset managers reported advisor education would be best delivered through proprietary training platforms, that’s easier said than done. As Cerulli noted, it’s generally only the largest players that have the heft and resources to put up a full-on alternatives education academy for advisors.

Asset managers looking to evangelize the benefits of private equity, private credit, and other alternatives may also consider less dedicated avenues like wholesaler and specialist meetings, conferences, webcasts, and hosted events, according to Cerulli.

Still, it’s unclear how receptive advisors would be to the idea of being schooled, as just 21 percent say they don’t know enough about alternative investments.

“It’s possible that advisors who don’t use the products are being held back by a range of implementation challenges but are likely also overestimating their own knowledge,” Cerulli said.

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