Research finds more financial advisers are utilizing alternative investments
DENVER – September 8, 2011– The Financial Planning Association® (FPA®) today released the “Alternative Investments: Adviser Strategy and Use” whitepaper, a research report that highlights the approach financial professionals use when identifying and utilizing alternative investment options for their clients. The research was conducted by FPA and sponsored by the Real Estate Investment Securities Association (REISA).
Through comprehensive research, FPA identified that 91 percent of surveyed financial advisers are using alternative investments. These investments include commodities, managed futures, hedge funds, and more. Advisers are drawn to the potential for low correlation of alternative investments to stocks and bonds to help smooth volatility.
According to the survey over 57 percent of advisers utilize alternative investments with more of their clients than they did 12 months ago, and about 31 percent plan to increase their use of alternative investments over the next two years.
Most commonly, financial planners are recommending REITS followed by commodities (not including gold or oil/gas) and funds of funds. While this holds true across the board, highly successful advisers (those with $200 million or more in assets under management (AUM) and/or those who work for a practice with $1 million or more in annual revenue) are differentiated by their use of hedge funds and options. They are twice as likely to use/recommend hedge funds and are nearly twice as likely to use/recommend options compared to their peers.
Additionally, the survey found that planners lack confidence in their client’s understanding of alternative investments with only 9 percent saying they are very confident or confident in their clients’ knowledge.
“FPA is pleased to participate in a research program that provides much-needed insight and analysis regarding investing in current economic conditions,” said Marvin W. Tuttle, Jr. CAE, executive director and CEO of the Financial Planning Association. “Advisers are facing new challenges daily and have to determine what is best for their clients. Having tools and resources to compare alternative investments is key to creating successful portfolios.”
A free copy of the report will be distributed to FPA members.
