FPA rolls out welcome mat for alternative investments

The Financial Planning Association, recognizing the growing appreciation of alternative investment strategies, has partnered with the Chartered Alternative Investment Analyst Association to provide FPA members with increased access to educational programs and materials related to alternatives.

The partnership gives all FPA members discounted access to UniFi by CAIA, an online series of educational offerings geared toward the needs of clients and advisers regarding alternative investments.

The partnership is in line with the growing trend across financial services of migrating toward alternatives in the wake of the historic 2022 market environment that saw stocks and bonds decline in tandem, leading to increased questioning of the traditional portfolio model of 60% stocks and 40% bonds.

While most financial advisors remain solid proponents of long-term investing, the worst return in more than 60 years for the 60/40 portfolio has sent a lot of advisors scrambling to achieve better diversification.

According to the FPA’s most recent Trends in Investing Survey report, advisors are increasingly embracing various alternatives on behalf of their clients.

Asked the investments to which they plan to increase allocations over the next 12 months, some of the biggest percentage increases over last year included private equity, structured products and alternatives in general.

The report showed 11.5% of advisors plan to increase allocations to private equity over the next year, compared to 6.2% who said that a year ago. Structured products increased to 11.5% from 5.6%, and alternatives in general increased to 11.5% from 6.8% a year ago.

Regarding the alternative strategies they are currently recommending for clients, 29% of advisors said private equity, 24% said multistrategy alts, 16% said long-short and 15% said managed futures.

While the portion of FPA members embracing alternatives is still relatively low, the partnership with CAIA is designed to get ahead of the trend.

“There’s a growing wave of alternatives moving toward financial advisors, and there are a lot of advisors who are new to this space and need some help,” said Aaron Filbeck, managing director and head of UniFi by CAIA.

“The trend started before last year, but asset managers are creating more products for individual investors, instead of just institutional investors,” Filbeck said. “The supply-and-demand push has been happening over the past five years, and people need to be better educated.”

Since its launch in 2014, CAIA’s educational program has enrolled more than 10,000 individuals in the Fundamentals of Alternative Investments certificate program.

The group since added two micro certificate programs focused on private credit and digital assets. Filbeck said programs on real estate and private equity are coming soon.

The FPA report found that 57% of respondents used the “other” option to list real estate, private debt, direct participation and REITs when asked to list other alternatives they are using for their clients.

“Our research shows that the use or recommendation of alternative investments has doubled in some cases since the start of the pandemic, and those numbers could be even higher if more professionals had access to quality education,” said Patrick Mahoney, FPA's chief executive.

“Access to this platform will help FPA members educate themselves, enabling them to assist their clients in understanding this increasingly trending asset class,” Mahoney added.