The recent surge in sales of alternative investment like nontraded real estate investment trusts and business development companies, as well as the rough market for stocks and bonds in 2022, indicate some financial advisors may be ready to reconsider one of the most sacred cows of the investing industry, the classic portfolio model of 60% stocks and 40% bonds, according to a panel discussion on alternative investments at Financial Services Institute's annual OneVoice meeting in Palm Desert, California.
The revised math for portfolios could eventually wind up in the neighborhood of 55% stocks, 35% bonds and 10% alternative investments, said Michael Alexander, president of Broadridge Wealth Management and Global Managed Services, speaking Tuesday on a panel titled "Alternative Investments: Not So Alternative Anymore."
Alternative investments include a wide swath of vehicles, from real estate to private loans and hedge funds, and traditionally have only been available to wealthy investors.
Financial advisors are primarily looking for alpha, or excess return above a benchmark, and a way to diversify their clients' portfolios, said Alexander, who added that the market for alternative investments is growing among less wealthy investors who don't meet the industry litmus test of possessing $1 million or more in investible assets.
“Portfolios have been allocated 60/40, equities to fixed income," Alexander said. "I think over the past year, it's about a 2% to 3% allocation [to alts] for portfolios, and raising it to 7% to 8% going forward. We’re seeing the growth.”
Another executive agreed. "With the 60/40 allocation, in my view, particularly in markets we faced the last year, advisors are starting to question that," said Erik Niland, senior vice president of investment research and product due diligence at Advisor Group. "Alternatives are a great way to get that diversification that advisers and clients are looking for."
He added that advisors considering alternative investments are also looking for ways to create low correlation in their clients' portfolios and provide some cushion from down markets.
Zocks has inked an exclusive partnership with mega-RIA Hightower, while Jump becomes the choice AI operating system for Equitable Advisors' field force.
The agency's proposal to rescind the contentious 2024 Biden-era mandate opens up a 60-day public comment period.
The Carmel, Indiana RIA grew nearly 150% in assets since severing ties with its first backer following a FINRA dispute.
Meanwhile, Raymond James' employee arm adds a defector from D.A. Davidson, and South Carolina-based RIA Ballast Rock Private Wealth recruits a new advisor.
A FINRA arbitration panel sided with a former wealth manager fired over a $642 deli platter and a disputed client event.
As $84 trillion prepares to change hands, advisors who treat estate planning as peripheral are quietly building a sieve, not a book.
In volatile markets, the advisors who win aren't the ones with the best calls - they're the ones whose clients stay the course.
