ETF Trends
ETF Trends

By Jason Plucinak via

If you’ve been advising clients for more than a decade, alternative investments probably haven’t been on the list of options you’ve discussed with most of them.

Sure, a handful of clients may have been interested in and understood the value of leveraging alternatives, but the majority of your clients’ portfolios likely consist of equities, bonds, and cash instruments. There’s a reason for that: they make sense.

And for decades, these traditional options have delivered on their promise of generating a consistent return on investment. But now times have changed. The Great Recession drove home the need for greater diversification, and an extended low-interest-rate environment has nearly wiped out expected returns on bonds and cash investments.

In the wake of such a shift, many advisors are looking to reallocate client portfolios from a traditional 60/40 model to include at least 20% in alternatives. The question is this: How can you introduce alternatives to clients to get them on board?

Here are 3 tips to help you guide the conversation with even the most traditional investors:

1. Present alternatives that are easy to understand.

When considering anything new, investors need to understand where their money is going and how it will deliver a return on investment. That means complexity is your nemesis. By presenting options that have a story your clients can relate to, you can help them feel more attached to what they are investing in. Present easy to understand options and your clients are much more likely to feel at ease.


2. Focus on transparency.

Even the most trusting clients aren’t (and shouldn’t be) willing to invest their hard-earned dollars in something that isn’t completely transparent. Point your clients to offerings that are publicly registered and have public, audited financials. If you do like an investment offering that is structured as a Private Placement, use only those with public, audited financials.

Transparency allows you to “look under the hood” to easily understand and explain the fundamentals of the offering. What is the risk exposure? How are assets invested? What is the source of the return on investment? When transparency is a given, your clients know what they’re investing in, so you never have to utter the words, “take my word for it.”

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