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RIAs Have Trouble Offering Alternatives to HNW Clients

By Alex Padalka April 11, 2018

High net worth financial advice clients are interested in alternative investment options but advisors have difficulty meeting that demand, according to a recent survey by PPB Capital Partners.

Sixty-two percent of advisors say managing private illiquid funds as part of their wealth management business is at least moderately difficult and 33% say it’s highly challenging, according to PPB Capital’s survey, which doesn’t specify how many RIAs responded. Advisors say the main challenges with alternatives are compliance, reporting and tax issues as well as the paperwork, while others say it’s “painful” to perform the necessary diligence on the investments and then explain them to clients, according to the survey. Fifty-two percent of respondents point to valuations as the most challenging when it comes to alternatives, followed by 50% who cited compliance as the main area of difficulty, 48% who pointed to tax reporting and 40% who said it was the paperwork, PPB Capital found.

Many advisors are also worried about clients’ concerns about potential “double-dipping” when it comes to fees associated with alternatives: 35% of respondents to the survey say clients are “sensitive” to even an appearance of double fees. And 29% of advisors are worried about fund operating expenses, PPB Capital found.

When it comes to getting their clients into alternatives, meanwhile, 34% of RIAs prefer feeder funds and 29% say their favorite vehicles are customized fund of funds, according to the survey.