Every RIA will need an Alternative Investment Advisor
High equity valuations resulting in declining stock prices, high inflation, and low bond yields. This puts advisors in a predicament if they are simply using a traditional stock/bond portfolio for their clients; take on more equity risk to replace portfolio income or lower their clients’ performance expectations. Due to a raging bull market over the past decade, advisors have not had to spend time in alternative investment markets. The times are changing, but is your RIA ready?
Between fielding phone calls regarding social security taxation and E-mails about contribution limits, it’s hard for an independent advisor to find the time to design and manage equity and bond portfolios, let alone alternative asset portfolios. However, alternatives will play a major role in the future of registered investment advisors and their clients, whether retail or institutional.
Two recent examples of Institutional investors opening the door to alternatives are;
- Tesla (TSLA) filing their 2021 10-k which read in part “we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds, and other assets as specified in the future.”
- The Ohio Police & Fire Pension Fund approved a 5% allocation to gold in 2020 in order to diversify their portfolio and hedge against inflation risk. The recommendation was made by the fund’s investment consultant.
What’s Next for RIAs?
For the large RIA firms, many will start to headhunt for the best commodity and alternative investment professionals they can find in order to strategically diversify their clients’ holdings. On the other hand, the smaller RIAs could be stuck between a rock and a hard place. The firm might not have enough revenue to justify a dedicated alternative advisor but also can’t afford to lose their clients to advisory firms that offer alternative options compared to their traditional investment portfolios.
This is one of the driving factors that lead us to position Macro Sky as an alternative investment advisory firm. We believe that every investor whether accredited or not, has the right to diversify their portfolio with alternative assets. Macro Sky provides the resources needed for you, the independent advisor, to manage alternative portfolios in house, reducing the possibility of losing a client to an outside money manager.
If you’d like to chat about what that could look like for your firm, contact us today.