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Alternatives have had a massive bump in popularity in the past several years, especially among institutional investors and High Net Worth investors.
But it seems many financial advisors are still lagging behind, in terms of awareness as well as usage in client portfolios. AltsDb co-founders Jimmy Atkinson and Andy Hagans discuss why this is the case, and whether it’s likely to change in the near future.
Watch On YouTube
- A statistical rundown of the current size of the alternatives market.
- Why major alts sponsors are beginning to turn their attention to the retail market.
- Some surprising stats on the usage (or lack of thereof) of tax-advantaged alts by financial advisors (especially in the DST segment).
- Why RIAs and advisors who do not embrace alternatives face some significant risks in the future (plus, an opportunity for RIAs and advisors who stay ahead of the curve).
- The two most popular platforms for advisors who want to source alternative investment products.
Featured On This Episode
- Non-Traded Alts Raise $52 Billion Through May, Stanger Lowers REIT/BDC Sales Projections (TheDIWire)
- Blackstone, Other Large Private-Equity Firms Turn Attention to Vast Retail Market (WSJ)
- DSTs And OZs For Advisors, With Louis Reynolds (OpportunityDb)
- Real Estate Investments For Ultra High Net Worth Investors, With DJ Van Keuren (AltsDb)
- 50% of advisors use alternatives, citing need for greater portfolio diversification (PGIM)
- White Paper Cautions Advisors on Underexposure to Alternative Investments (RIA Intel)
- The Big Winners if Advisors Wake Up to Alts (RIA Intel)
- As alts get hot, alts marketplaces try catering to RIAs (Citywire)
- iCapital – Official Website
- CAIS – Official Website
Today’s Guests: Jimmy Atkinson & Andy Hagans, AltsDb
About The Alternative Investment Podcast
The Alternative Investment Podcast covers new trends in the alternate investment landscape. Hosts Jimmy Atkinson and Andy Hagans discuss tax-advantaged investment strategies to help you grow your wealth.
Andy Hagans: Welcome to the Alternative Investment Podcast. I’m Andy Hagans.
Jimmy Atkinson: And I’m Jimmy Atkinson.
Andy Hagans: And today we’re going to answer the age old question “Why aren’t more financial advisors and are using alternatives?” and Jimmy It really is a trillion dollar question, I think, because this industry, the alternatives industry has just exploded in popularity in the last decade or more.
And advisors I hate to say it, are still lagging behind, I mean luckily, you and I get to interact with so many RIAs and wealth managers who quote unquote “get it.”
But there still are a ton of financial advisors who they’re just not aware of them, or they don’t want to use them, or they just aren’t using them and we’re going to talk about why that is.
And Jimmy you’ve sent me some links that you want to talk about today, because I think there’s a lot to unpack here, but why don’t we start with this link Jimmy The DI Wire reporting.
On this recent release from Robert A Stanger and company on the size of the alternatives industry.
This year, you know the inflows this year and I know we recently covered this on a round up episode six weeks ago so maybe we could just touch on these numbers briefly Jimmy. How big is this industry?
Jimmy Atkinson: Well, maybe we can zoom out a second before we touch on this.
Article Andy I wanted to kind of reply to something you said in the intro which was, this is an age old question I don’t know if it’s age old or not but it’s become a lot more relevant, certainly in the last six to 12 months right Andy with the way that the market has gone, I mean just looking at.
How, a lot of investment portfolios are put together on and i’m talking about retail investors right now institutional investors have for a long time.
had a lot of exposure to alternative so we’re talking about kind of the shift into alternative investment products by the retail end of things.
For a long time, you know it was okay for retail investors to be focused primarily on stocks and bonds, because those two asset classes were negatively correlated but you know, for the past.
I don’t know I don’t know how long any Maybe you can give me some insight here but but for for at least the last six months or so it seems like.
there’s been positive correlation between those two asset classes and that they’ve both been going down certainly over the last six months bonds are no longer acting as a ballast for.
Andy Hagans: stock Jimmy yeah well, let me give you my.
My little phrase here Okay, in times of crisis, all correlations go to one and and I don’t know if this is where you’re going with this with alternatives.
But I would also say a lot of the non traded adults are correlated with those as well and they’ve also gone down, although, in some cases, in some cases, the you know that price change it’s just it’s not clear yet because also illiquid and you know that that those assets may not be transacting.
But anyway, go on.
Jimmy Atkinson: There was another point I was going to make was.
And I think will touch upon this as the episode unfold today as our conversation unfolds dandy but you know some reasons why iras or other financial advisors and the retail investor are.
Maybe underexposed alternatives or don’t have as much skin in the alternative game is because alternatives do suffer some problems right, we will you do face some headwinds when you get into them one they’re complex oftentimes to they can be expensive.
And three they can be hard to access for they can they are, by definition, more illiquid than most traditional assets.
Andy Hagans: With a Jimmy I mean who cares the auto industry is just this tiny little industry without a lot of big numbers behind it right.
Jimmy Atkinson: yeah exactly right so so you wanted me to turn to my attention to this article.
you’ve got pulled up over here now, so it looks like well, what do we got here we we covered this topic in when when was it a month or two ago Andy.
On the podcast it looks like alternative non traded alternative assets total 51 point sorry $52.1 billion and that’s just through may of 2022 so that’s just through the first five months of the year.
fundraising for the alternative asset class according to Robert a stinger and company and i’d like I pointed this out last time also staying or doesn’t track a couple of what we might consider alternative investments.
and probably the 800 pound gorilla in the room, with respect to our businesses Andy is they don’t track qualified opportunity funds I don’t believe, but you know that the the $52.1 billion.
According to the article here tracks reads followed by non traded vcs and then interval funds and then finally Delaware statutory trust or DST is Is there more commonly referred to, which are.
certain types of fractionalized 1031 exchanges that invest in in real estate.
properties Jimmy regardless if the assets.
Andy Hagans: contained in some of these alt products, regardless of the assets have gone up or down in price we’re looking at serious inflows into these products right and and as this article mentions.
This figure through may 2022 is 108% a 108% increase over that same time period of 2021, and I mean we’ve we’ve really had economic uncertainty since q1 of this year.
Obviously that’s kind of accelerated a little bit in q2 of this year, but despite that economic uncertainty we’re still seeing heavy heavy and flows into the alternatives industry.
Jimmy Atkinson: yeah it’s incredible isn’t it more than double the same amount over that same what is that five month period.
year through January one through may 31 I guess it is, and I think you know, the bottom line here is that.
Investors are chasing Roi they’re chasing yield and they’ve stopped finding it with stocks and bonds and so they’re they’re headed elsewhere they’re headed into alternative, so I think.
You know, structurally there were a lot of tailwinds for alternatives, probably coming into this year and then the market downturn is probably only accelerated the.
The growth of all in the first several months of the year, I don’t know, do you have any any other thoughts on that Andy.
Andy Hagans: No, I think you’re right and let’s talk about some of those structural tailwinds Jimmy, and so the next link that you sent me that Scott, was it Scott, no Michael and I covered.
In our recent round up.
Was this headline on the Wall Street Journal blackstone and other large private equity firms turn attention to vast retail market so they’re going after the mass.
affluent you know individual investors with one to 5 million in investable assets, so the quote unquote merely high net worth even not even necessarily the very high net worth the you know the mass affluent and you know the interesting thing here Jimmy is.
The article says that pension funds and sovereign wealth funds have an average of 26% for pension funds and 35% for sovereign wealth funds.
of their portfolios in these alternative asset classes, at the end of the year, and so the idea here is, as these institutional.
they’re more or less meeting their allocation targets within their own you know large very large portfolios that they want to allocate to alternatives.
So that’s you know that’s That was one tailwind that really contributed to just massive growth in the past decade there’s so many institutions waking up to the fact that.
They need to be allocating a healthy percentage, you know 2025 3035 40% of their portfolio to all and then slowly shifting some of those assets into alternatives.
According to this article in the journal, you know that shift I wouldn’t say it’s it’s going to end, but it may have peaked in terms of its effect.
On the flow of capital, I mean, I still think there are you know, there are going to be still a lot of institutions who are going to continue to do that, but sort of the biggest the heaviest lift maybe behind us.
But That being said, all of these sponsor companies, including you know the 800 pound gorillas the black stones the blue owl capitals, the Apollo.
Global management, they they still obviously are looking for growth they’re looking to you know.
gain new investor assets, so I think it’s only natural that they’re Now turning to the retail investor and when they’re turning to the retail investor, that means they’re also turning.
To the advisor right the wealth managers that are as the advisors who are helping manage you know the portfolios for all of these individual investors so Jimmy would you say that this is the pivotal moment you know when when it’s finally starting to happen.
Jimmy Atkinson: What seems if not now, then when right Andy and to your point, it seems like we’ve kind of hit a ceiling with institutional investors in terms of how much more how much larger that addressable market can be.
Andy Hagans: let’s let’s not say a ceiling let’s say.
Maybe the the acceleration or the growth is slowing down.
Jimmy Atkinson: yeah well yeah i’d say yeah I think that’s fair to say, the growth of that market.
has slowed down where because you know a lot of institutions have are already allocated to alternative investments.
In in what they deem to be an appropriate amount, whereas if you look at the smaller mass affluent retail investor high net worth retail investor.
And their advisors have there’s still a lot of waking up left left to be had there I think and we’ll get into some of the numbers, a little bit later in the conversation today.
Andy Hagans: Well, let me interject you have you can see what i’ve highlighted on my yeah.
Jimmy Atkinson: Let me, let me take a look here.
Andy Hagans: Okay yeah, by the way, you know our podcast is on YouTube now so if you’re watching on YouTube obviously you can see what we’re highlighting if you’re listening to the audio version of podcasts will make sure to link all of these articles in the show notes.
Jimmy Atkinson: I would say if you’re listening stop listening and.
load up YouTube immediately.
So you can unless you’re listening to this on your commute.
Andy Hagans: i’d say fair enough with the audio for safety reasons, but individuals, this is, this is what the text that i’m highlighting individuals worth 1 million or more held 79.6 trillion in investable assets globally in 2020 according to a 2021 report by consulting firm kept Gemini.
But private equity firms estimate that less than 5% of that amount less than 5% of that basically $80 trillion.
is currently invested with them so so that that’s nowhere near you know the ceiling or even probably the halfway point.
Of of this shift that we could see into alternatives on the part of the retail investor on the part of the mass affluent you know high net worth or very high net worth even ultra high networks are still probably under allocated significantly to alternatives.
Jimmy Atkinson: yeah I I think you’re exactly right there, and I mean there’s a long way to go in terms of capturing some of those retail investor dollars.
So I think what you’re going to see and we’ve already started to see this unfolding, but what you’re going to continue to see unfolding.
Over the next few years, and probably the next decade or more will be a bigger push into the retail market by these alternative investment product sponsors, for that very reason it’s a land grab.
Andy Hagans: According to matt brown yeah yeah CEOs case right.
yeah, it is a land grab so quote you’re seeing the mutual fund boom 2.0.
You know, referring to the mutual fund boom of the 1990s, so Jimmy we’re talking about retail investors Okay, and so many of them, obviously, our assisted by advisors by our is by.
Wealth managers and you know you interviewed i’ll let me bring up this next link, so this link is a podcast page, for your interview with Louis Reynolds.
On opportunity db calm and so this is a recap, of the interview and.
For viewers, you can click on the link and check out the whole interview but.
Louis had some interesting things to say about DST specifically so he was talking about just one segment of the alternatives market, although.
You know it’s it’s pretty significant segment and I know have been increasingly popular in the past few years they’ve been growing quite a bit, but he had some really surprising thoughts on how many advisors are actually helping place clients into DST.
Jimmy Atkinson: yeah good point there and he’s uh yeah louie Reynolds is the CEO of synergistic exchange solutions there a platform for advisors to discover.
Different alternative investment products, including qualified opportunity funds and Delaware statutory trust and he made a point during our interview that there are approximately 600,000 licensed advisors in the United States.
But given that large number of advisors, he pointed out that only 1000 of them did any DST deals last year, and only 50 of those ended up doing approximately 65% of the total volume so uh.
Andy Hagans: Jimmy do you know that’s that’s 600,000 number is that broker dealers does that include our age.
Was that was that just his number, do you know that.
Jimmy Atkinson: was his number, and he referred to them as licensed advisor so we might have to go back to him and asked him what exactly he meant by that, but I think it didn’t include broker dealers and ra a’s and other types of financial advisors, with some sort of license.
Andy Hagans: Okay, and sorry repeat the numbers again, did you.
Jimmy Atkinson: 600,000 licensed advisors only 1000 of them did any DST transactions last year.
Andy Hagans: Though so less than a fifth of a percent did it yeah.
Jimmy Atkinson: And so we joked about what are the other 599,000 licensed advisors doing because surely there are more than 1000.
advisors who have real estate investors who would potentially benefit from all of the tax mitigation that doing a DST deep a deal would entail.
Andy Hagans: Especially when you consider we’re talking about the mass affluent right from that last previous article.
In the journal talking about the mass affluent the high net worth clients and so many of those folks have either built their wealth through real estate.
Right or they own some investment real estate right, so a very significant proportion of those clients would be eligible to do 1031 exchanges into a dsp rights it’s not like it’s a bunch of folks it’s not like it’s all a bunch of you know, Google millionaires sure.
Jimmy Atkinson: yeah absolutely I mean.
600,000 licensed advisors, I mean.
Certainly, almost all of those probably have at least one or two clients that would.
be capable of doing some sort of DST do it at some point during the year so you know we were we were lamenting the fact that there really hasn’t been more uptick in DST deals, probably because of.
lack of awareness, for one, maybe complexity of doing it, maybe there’s some sort of knowledge gap or educational hurdle that needs to be clear.
It might just be lack of time, lack of bandwidth on.
On the behalf of.
A lot of different advisors, you know, maybe they don’t have time to look into this stuff or diligence these types of DST funds that invest in real estate there’s a variety of reasons, but it shocked both of us that that the number was so low and.
Andy Hagans: I think you want us yeah I do want to say Jimmy.
You know, with our listenership and viewership adults db we have a lot of advisors in our a’s and family offices.
In our audience and I think they you know they are the advisors who get it like I think we’re probably preaching to the choir.
A little bit here, so you know there, there are advisors who are using the Mr very few ID number and actually just finished recording.
With justin white so and I don’t know when this episode runs it’s either going to be the episode previous to this one, or it might be the subsequent episode that we publish.
That he does a lot of 1030 ones with some centennial advisors and they help place a lot of clients and do replacement properties and help them complete 1031 exchanges and he did mention that he has seen an uptick.
among financial advisors who are using their services, so I think it’s a small number, but it is, it is growing and.
You know, speaking of advisors and family offices, I want to bring up our next link, which was another old stevie podcast episode that we recorded with DJ van quran.
Of the evergreen property partners, as well as the family office real estate Institute and he talked about you know, the idea of all of these tax advantage all.
And a lot of family offices and so now we’re talking about ultra high net worth investors they’re not even necessarily using these tax advantage programs with their real estate transactions, even though it seems like it should be a slam dunk sometimes it just isn’t happening.
Jimmy Atkinson: yeah and I don’t remember the exact number that he pointed to Andy maybe maybe you recall, or maybe there wasn’t an exact number but, but I know that this kind of.
compounded on what louie was telling me when I did that interview with him a couple weeks earlier.
which was it’s kind of surprising how few investors how few advisors how few family offices are doing these hugely tax mitigating investment vehicles like DS DS and 1030 ones, you know you look at.
A family office and you think oh this this family’s worth 100 million dollars or 250 million dollars worth of the cases surely they must be sophisticated.
Probably they are sophisticated in one sense, because they earned that wealth.
in some way, but if it wasn’t through real estate, maybe they’re not sophisticated real estate investors, maybe they haven’t cottoned on to some of these tax mitigating strategies that.
Andy are kinda like second nature to you and me because we’ve been podcasting and writing about them for so many years right.
You have to remember that that family offices have a learning curve to clear, in many cases as well do you remember what what DJ said exactly about you know, the number of family offices that we’re not doing 1031 exchanges when when they should.
Andy Hagans: yeah I don’t remember the exact figure but.
Jimmy Atkinson: I.
Andy Hagans: you’re exactly right that it was it was even at the ultra high net worth level, a lot of times these transactions occurred, and they were not being.
executed as a 1031 exchange and so you know, again, you know you you don’t necessarily want a client to have that the tail wagging the dog right you don’t need to.
structure, a transaction is a 1031 exchange just to say you did, but the truth is most commercial real estate transactions, I would think that most of them you’d at least want to give heavy consideration to completing a 1031 exchange.
And even at that family office level at the ultra high net worth investor level, a lot of times it’s just not happening in our next article and now, now we have some hard statistics Jimmy this is from PG I am investments.
The article titles 50% of advisors use alternatives, citing need for greater portfolio diversification, so I guess, this is a positive spin on it Jimmy the article is claiming that approximately 50% of advisors.
Report using adults in client portfolios, although only 31% of the whole indicate that they have access to a wide range of alternative investment options.
And 19% site limited access and then, then the other half of advisor surveyed said, they do not use any olds in client portfolio, so I guess the negative side of that is.
You know 50% of advisors say they’re not using all and then another 19% above that say they only have limited access, what are your thoughts here Jimmy.
Jimmy Atkinson: yeah Well, this is one of the knocks on alternatives that I mentioned within the first minute or two of our conversation and D right I mentioned some of the downsides to all our complexity.
illiquidity and well I forget what what cover the other ones were well one of them was lack of access or they’re they’re hard to to access oftentimes both for the.
Direct investor himself, like the actual individual investor, but also for the advisor community.
little bit later in our conversation today Andy I know I think it’s the final article we’re going to pull up we’re going to talk about some of the platforms that have.
been shedding some light on alternatives for the advisor community, but you know, trying to this article now and seeing.
Only 31% of advisors have access to a wide range of alternative investments what what a problem that is and what an opportunity, it is really for for the potential of alternative investments.
yeah it’s interesting that.
Success to put a spin on the other way it’s fascinating to me that only half of advisors have any type of exposure to alternatives in their investors portfolios.
What do you want, what are we highlighting here now Andy.
Andy Hagans: 29% of advisors do not believe alternative investments are appropriate for their clients or consider them too risky.
Right yeah I don’t know if I want that 29% to be my advisor who just writes off entire major asset class is just quote too risky.
Jimmy Atkinson: yeah there was essentially they’re betting against alternative investments when they when they say that.
Andy Hagans: It on a market CAP weighted basis that’s almost like same publicly traded stocks are just too risky let’s not invest in them, you know, like for a certain.
For certain level of client now look if you have if you’re a younger advisor with a younger client base, and you have you know a lot of clients with.
You know, low six figure portfolios or something and you’re saying look, you know, a target date retirement fund that’s that’s appropriate for a lot of my clients that makes sense to me, but once you’re dealing with very high net worth ultra high net worth clients.
I really think that’s a very outdated point of view.
hmm Am I am I going wrong here Jimmy Am I.
My off base.
Jimmy Atkinson: Well, I don’t think so.
But i’m not one of those i’m not part of the 29% so maybe we could find one of those 29% at some point and get him on the podcast and.
asked him why he feels that way that’d be that’d be interesting to kind of delve into that so this part you’re highlighting right now is fascinating to me talk about talk about mutual funds and etfs for a minute here Andy.
Andy Hagans: yeah so Furthermore, you know when you talk about this this says only 50% of advisors are really using all.
That these advisors, primarily, and these are the ones who participated in the survey, but they primarily prefer to access alternatives via mutual funds and etfs followed by closing funds.
and master theater vehicles slash limited partnerships so there’s even a lot of product rappers Jimmy that I would say, are you know alternatives mainstays.
That aren’t even included by any of these buckets you know eat, for instance, your favorite qualified opportunity funds right they’re probably like a rounding error of the.
Jimmy Atkinson: survey sure for sure yeah.
Andy Hagans: survey, you know participants, you know so so even you know, depending on the mutual fund or ETF, they were talking about.
You know, there may be a liquid order, there may be something that I would barely even classify as an alternative, you know, at least, at least in the frame that you know we use for alternatives adults db which tend to be you know, the more we cover the more illiquid non traded fault.
Jimmy Atkinson: yeah and then the the chart below here on your screen Andy 63% of advisors who do use alternative investments for their clients prefer to use mutual funds and etfs now the these categories aren’t mutually exclusive, because they add up to far more than 100% but.
There seems to be like some sort of disconnect here in the survey questions, and this was a survey of I think at the top it’s at 400 different financial advisors.
And, on the one hand, half of the advisor say they don’t use alternatives, a large percentage, I think it was what 18 19% said they have limited or no access to alternatives.
But then 63% are saying they use mutual funds and etfs to access alternative asset classes.
Every every advisor has access to I would guess a pretty wide range of the overall mutual funds and etfs universe, so I think.
Even some advisors, maybe don’t consider mutual funds and etfs to be alternative investments, but those who are investing in alternatives are primarily using mutual funds and etfs does does that make sense to you and you’ve kept.
Andy Hagans: yeah I mean you know, I guess, we can take commodity etfs and gold etfs and you know mutual funds that you know hold commodities and things like that, and you know we can call them alternatives and.
Jimmy Atkinson: You know I might say, like trend following etfs also that.
take into account.
Andy Hagans: So I get.
Jimmy Atkinson: rid of contracts yeah.
Andy Hagans: That brings up an issue Jimmy that I think we face a lot adults db is that different people mean different things when they say alternative investments so you.
Know sometimes all that means is.
it’s an alternative strategy, but the rapper or the Fund or the manager is is buying and selling traditional investments they’re just using a non traditional or alternative strategy.
When they’re investing or trading those investments and then you know a lot of people, you know what sometimes use it to me like liquid all it’s like commodity etfs gold etfs things of that nature.
You know, on our side of the industry we’re talking about illiquid adults non traded dollars, you know, five or six be in five or six seed funds.
Typically, invest in real estate, but also sometimes operating businesses and, of course, we also have energy programs, and you know things of that nature, so you know any kind of survey like this, I think you you identified something there Jimmy which is just.
A lot of advisors and even industry professionals, they mean something different when they say alternatives and or alternative investments and and and that just kind of adds to the confusion and opacity and you know some of those headwinds that the industry faces, but nevertheless.
The alternatives industry is growing by leaps and bounds, and I think it’s it’s probably inevitable that some advisors will be left behind, probably not the advisors who listened to our show but but definitely some advisors will be left behind, and that brings up my next link.
Jimmy Atkinson: yeah you can you can go just go back to that article just for one more moment here just to kind of round out my thoughts on it, I think.
One of probably I don’t know, maybe one of the biggest reasons is that lack of liquidity right that’s why advisors don’t put their clients.
into alternative investments so one way around the lack of liquidity is to put them in publicly traded alternative products like mutual funds and etfs so you can always get out or get money get it get some liquidity from those rather easily so.
I guess we’re kind of going around in circles here, but I just want to point that out, maybe that’s why so many of them prefer mutual funds and etfs.
Andy Hagans: But, but nevertheless, some of them are going to be left behind, at least that’s the that’s the implication of this story from ra Intel.
title of this story is White Paper cautions advisors on under exposure.
To alternative investments, and let me just read the lead quote here, and this was published on October 27 of 2021, by the way, so it’s a pretty recent article.
Quote at some point if they’re ignoring these markets, then, even if you follow a passive investing argument.
Then they’re no longer getting the market return by avoiding them says to Neil Shapiro associate director at Surly an author of a new report.
On alternative investments, and I think that’s right Jimmy because on a market, you know so many of these passive investment strategies are based on market CAP waiting right and as the alternatives industry.
gets bigger and bigger and as more funds are flowing into alternatives funds.
Even on that pure passive sort of market CAP weighted approach you’d need to be in alternatives if you want to claim to have that diversified portfolio where you’re just quote buying the market isn’t that right.
Jimmy Atkinson: that’s right and is Daniel Shapiro points out, he stole one of my quotes I think he says, because if they’re not allocated to alter making a bet against.
These private markets and okay full disclosure I probably stole that quote from him, I think I read it before we went on the air and he said that’s why I had it in my head.
But yeah it’s essentially making a bet against private markets um what else did we want to cover in this article here anyway, what are some other salient points you wanted to highlight.
Andy Hagans: Well, I mean the article points out, there are a lot of ra who who do get it right and so they’re using some of these platforms, that I know we’re going to talk about.
In a minute, but this this article really from our a until I think it it’s sort of drives home and reiterate what we discussed from our previous source that there are many advisors that don’t allocate anything.
To alternative investments and those who do they’re not making substantial changes.
So you know, according to this article advisors only plan to increase their allocation in alternative assets by 1.3% from 10.5% to 11.8% over the next.
Two years so going back to the very first or know the second article we covered rather talking about how much institutionalized and sovereign wealth funds allocate which is 26 and 35%.
respectively individual investors are still way lower in terms of their allocation to all set up at 11.8% and you know another interesting thing at.
Jimmy Atkinson: Any hang on to say, if you.
click through to the don’t allocate anything just trust me click that click that link right there.
i’ve got that on pulled up.
On my screen right now, this this article is a couple years older it’s from September of 2019, but you can kind of scroll down.
A few paragraphs most right there most private wealth advisors 55% don’t allocate any client money to all.
And those who do might not be allocating enough so this actually says amongst those surveyed advisors that use all the average allocation is below 5% so it has grown over the past few years, but it’s still it’s still pretty far behind this article again being from.
The wealthiest private investors often allocate 40% of their.
Andy Hagans: Jimmy I want to point something out to that with a lot of alternatives, you know they’re really partially driven by tax advantages.
hmm those tax advantages are most applicable to individual investors right not to institutional investors so.
If anything I would think ultra high net worth individuals and family offices should have the very highest allocation two alternatives.
Possibly higher than institutional is, of course, you know you have investment horizon, you have you know time horizon I guess is another factor in terms of being liquid.
or illiquid but like we’re talking about DST we’re talking about Q laughs I mean that should be the bailiwick of very high net worth ultra high net worth investors, as well as the ra a’s and family offices, who serve them I would think.
Jimmy Atkinson: Well, I think I think access to all for a very long time was closed off to smaller investors, I mean you know alternative asset.
investment products really didn’t cater to our age, they didn’t cater to the retail group they really only wanted institutional money for a long time it’s only recently.
That we’re seeing the shift underway and i’m glad you brought up qof sandy I can get on my soapbox for a minute I mean again I as I as i’ve said on this podcast and.
My opportunities owns podcast for a long time, I think it’s the greatest tax incentive ever created.
But it applies really not to institutional investors you don’t pay taxes, anyway, but implies are oftentimes don’t because they’re there they’re shielded but it applies.
largely to individual investors who can save a whole lot of money on on their taxes by by investing in opportunity zones.
yeah, what do you what else you got here.
Andy Hagans: Andy with us, I I think we’re where we want to go next.
And I know we’re running short on time but, but I want to cover this so you know we’ve spent so much time in this episode about.
iras and advisors who you know quote unquote don’t get it, but, but again I know a lot of our listeners and viewers.
are ahead of the curve right and are already using alternatives and client portfolios and several of these links that we’ve brought up and some of this data.
You know, suggest that a lot of advisors aren’t using alternatives because of limited access, they can’t find them or they have no practical way to invest in them, and so I want to read this from ra Intel.
quote the increasing use of alternatives is also driving growth at platforms like I capital network which raised 440 million in funding this past fall and CA is which has built an intuitive learning system to help advisors learn more about all and we say case right Jimmy.
Jimmy Atkinson: it’s pronounced case, but it is capital CA is that’s right.
Andy Hagans: Right and that relates to this last final article that i’m going to bring up here from city wire as adults get hot offs marketplaces try catering to our eyes and I believe this article mentions case, as well as I capital.
Jimmy Atkinson: That an.
Andy Hagans: talks about some of these platforms so so Jimmy could you could you talk a little bit about these platforms and and you know what you’re seeing with ra is accessing them and their increased popularity.
Jimmy Atkinson: yeah of scroll down if you don’t mind me to that header the marketplace market right there yeah, so I think that that key paragraph that second paragraph there i’ll just read that on institutional level, a leader has emerged and I capital network go ahead and highlight it Andy.
which aims to bridge that divide founded in 2013 about 10 years old now.
New York firms platform service today services some 100 and $5 billion in assets more than double what it had at the end of 2019 across nearly 900 funds so.
I capital is essentially a platform for alternative investment products to list on to get in front of.
our eyes and also ultra high net worth and high net worth investors and just the fact that it’s gone from about $50 billion in assets to over 100 billion dollars in assets just in the last two and a half years.
That tells you how much investors are chasing Roi how much they’re chasing yield how much they’re shifting away from traditional assets and into.
into alternatives and how much this particular product has grown how much funding did it say that they raised in that previous article and it looks like they raised What was it 440 million dollars.
Andy Hagans: For 140 million, and I mean at.
Jimmy Atkinson: least $440 million in funding that’s on a $4 billion valuation I capitals worth $4 billion.
Which is pretty impressive for a platform that’s that’s just 10 years old now.
What else do you have here Andy you want to read this next one here.
Andy Hagans: yeah you know, so I capital is end to end platform, you know quote unquote end and platform it’s so it’s that full stack and you know the quote here is we’re trying to serve advisors wherever and however they choose to practice whether that’s large banks.
IV DS or ri a’s, and I mean, I think that might be one of the major points here Jimmy is.
You know registered REPS maybe you know use your particular platform are required to use a particular platform and they won’t have necessarily access.
To a lot of these products, but I capital has struck a lot of partnerships, so we highlight this partnerships provide another robust pipeline of new customers, for I capital.
Because the company struck deals without apart and invest net to provide its products on their marketplaces.
So I capital white labels its technology to around 128 firms that offer I capital products to their own.
clients so part of that strategy, this is a quote part of our strategy is to be the alternative plugin to help power other marketplaces, so I think Jimmy that’s how they’re able to reach.
A lot of ideas, obviously, are as can can kind of go anywhere right on any platform, but they’re going to be time limited right so.
I think, reaching all of these markets it’s pretty hard and you could see where a company like I capital with.
You know, frankly, just a big war chest, and you know a lot of resources they’re able to strike some of these partnerships and and give.
Just a huge number of financial advisors access to these products, and I would say, even if I capital is a competitor in many ways.
To a lot of companies in the space, including case which this article mentions here i’m.
just giving me access to alternatives and sort of nudging advisors in that direction is probably a good thing for the industry long term.
You know, regardless of what platform that’s occurring on because I think advisors just need to get used to the fact that it’s healthy to allocate a percentage of a client portfolio to alt.
Jimmy Atkinson: For sure Andy I think these two platforms in particular are helping to grow, the pie and they’re helping.
advisors go somewhere to learn more about the product, and to do due diligence on the different products so you’ve got I bet it’s amazing how much money these these two platforms are worth, given how young they both are.
I capital being worth, I think it was $4 billion in valuation based on another article not this one, and then.
This article mentions that cases is worth $1 billion after raising 225 million from from Franklin templeton Andy let me ask you a question now maybe to kind of help around out our conversation here.
You know, for our a’s that are calling on to alternative investments and the tax mitigation strategies that all to offer the diversification that also offer.
oftentimes the the non correlated nature, sometimes not but sometimes the non correlated nature with more traditional assets that also offer what are some of the advantages for some iras who have an alternative investment strategy in place.
Andy Hagans: yeah that’s a great question, I mean.
Jimmy Atkinson: Especially in terms of attracting more clients just to lead the witness a little bit.
Andy Hagans: Sure, well, I think it’s a differentiator right as you’ve mentioned that you know wealth planning it wealth management is a pretty crowded.
mature market, and so, if you’re a financial advisor, especially if you’re targeting clients nationwide there’s a lot of competition out there right so focus on all sort of expertise and all it’s.
Definitely, a point of differentiation, I mean you know we we already talked about how few advisors are used to helping clients.
perform DST or 1031 transactions into Delaware statutory trust, I think the same is true for Q f’s and for all types of bolts, but one other point that bring up Jimmy.
Is that investors who are interested in tax advantage all are almost def initially going to skew towards being at least high net worth if not very high net worth or ultra high net worth So if you think in terms of you know, not just number of clients, but the the the wealth.
You know, owned by clients potential clients who are interested in all it’s you know I think it’s going to skew towards.
Frankly, a higher net worth client base, who are interested in these tax advantaged programs, so I think there’s a huge opportunity for our a’s.
And I know i’ve heard from a lot of sponsors and industry folks who say you know sponsors are aware that this is a huge opportunity for them to reach our is.
And it’s you know it’s kind of a fractured market so it’s hard to reach it’s expensive to reach independent ra is.
But certainly I think that that’s top of mind for a lot of sponsors to reach them, so I think really that’s that’s kind of where we’re circling around it.
that’s The opportunity is for sponsors to really accurately tell the story of you know their products and you know now that we have fiber succeeds there’s just so many options for investors.
And so we need to spread the word, we need to get the word out an ra is on their end I think they are increasingly understanding that these products can be of benefit to their clients and I think.
Some retail investors even are asking for it so certainly we’re going to see a lot of growth in the next several years ahead, and I think.
As an ra as a financial advisor you know the question for each advisors are you going to stay ahead of the curve, or are you going to potentially be left behind by ignoring this market Jimmy do you have anything to add.
Jimmy Atkinson: Just stole my thunder Andy I got nothing else.
To add you’ve left me speechless for one so yeah but I.
I agree with everything you said very well put I think there’s a huge opportunity both for alternative.
Investment product sponsors to get in front of more investors, but also for our as to grow their rolodex or client base by catering, to those who are interested in.
Tax advantaged alternative products exactly right Andy I guess I wasn’t speechless alternate back over to you now, though the.
End go for it.
Andy Hagans: Absolutely, so I just want to remind our listeners obviously our viewers have been following along on the screen share.
But for our listeners you’ll be able to find links to all of the resources and new stories that we mentioned.
In today’s episode on ultra TV COM slash podcast you can get the show notes.
and also a reminder to everyone watching this video or listening to this show don’t forget to subscribe to the show on YouTube and on your favorite podcast listening platform.
So that you’ll be sure to receive our new episodes as we release them Jimmy thanks again for coming on the show.
Jimmy Atkinson: Thanks Andy always a pleasure.