Wealth firms using less tech support than expected in alts push

A growing number of wealth management firms are offering alternative investments, but many are still struggling to manage them efficiently due to lagging technology adoption, according to new research from consulting firm F2 Strategy.

In its first-quarter 2025 trend report, F2 found that the share of firms incorporating alternative investments into client portfolios has grown from 75 percent in 2022 to 88 percent this year. The average assets under management allocated to alts also surged over the same period, from $7.5 billion to $12 billion.

According to joint research from CAIS and Mercer that was published in December, 92 percent of advisors currently use alternative investments, while a near-equal majority of 91 percent said they plan to dial up their allocations within the next two years.

Despite growing adoption, only half of firms in F2's first-quarter pulse survey reported using a third-party technology platform to manage alternatives. The rest are relying on manual processes –an operational burden that’s growing heavier as alts become a more mainstream offering.

“We would expect to see the use of technology grow at the same rate or even faster than the increase in firms using alts,”  Doug Fritz, F2 co-founder and executive chair, said in a statement. “But we’re seeing only half of firms using tech which means many are doing it manually – and doing it the hard way.”

For the firms that have embraced digital tools, the benefits appear to be significant. Eighty-three percent of firms using third-party platforms for alts reported gains in operational scale and workflow efficiency. Seventy-five percent saw improvements in data accuracy, while two-thirds cited enhanced data visibility and timeliness. Half reported better integration with their existing systems.

The report also notes a trend toward consolidation, with many firms choosing alternative investment platforms offered by vendors they already work with. That strategy, according to F2, is often aimed at streamlining existing infrastructure. Envestnet and Schwab have scored non-trivial wins on that front recently, with Envestnet announcing an expanded partnership with BlackRock while Schwab unveiled its own new alternatives platform for high-net-worth investors.

Among wirehouses and larger wealth platforms, the inclusion of alternatives in broader investor portfolios has scaled meaningfully. But this expansion has made it more difficult to integrate these assets into firms’ broader tech ecosystems.

F2’s findings also highlight growing pains when it comes to reporting on alternative investments. While investment operations and automation rank as the top challenges, reporting is not far behind. Firms cited issues with reconciling internal rate of return metrics from alternatives with the more traditional time-weighted rate of return – particularly when trying to present performance in a unified way.

The firms who crack the code on performance reporting could gain a meaningful edge in the HNW space. According to research by Cerulli, 98 percent of HNW practices offered consolidated performance reports as a service, with 90 percent having it as a primary or secondary offering. Among wealth firms, 31 percent said they were developing performance reporting capabilities internally as a tool to attract and retain top-caliber advisors.