Over the past year, economic and market headwinds have had an outsized impact on the wealth management space on a number of fronts, with the growing demand for alternative investments among retail investors among the most notable. Traditionally the purview of institutional investors and ultra-high-net-worth individuals, clients in search of returns have democratized the alts space — an evolution that offers both challenges and opportunities for financial advisors and the firms that support them.
Sanctuary Wealth, which recently announced the upcoming launch of its Capstone Income, Balanced and Growth liquid alternative models, has actively supported the alts capabilities of its partner firms and their advisors since its inception — a strategy that has accelerated under the watch of firm CEO, Adam Malamed, who recently celebrated his one-year anniversary at the firm’s helm.
Alternatives Watch caught up with Robert Walter, president of Sanctuary Wealth’s broker-dealers and RIA, to discuss this shift in the alts market, the role tech is playing in its transformation and how his firm is streamlining the management of the asset class across the full investment lifecycle.
Alternatives Watch: Alternative investment strategies continue to evolve and mature, especially as technology and diversification of these vehicles continue to lower the barriers to entry for investors. However, for advisors supporting HNW and UHNW have these changes shifted their approach to the asset classes? Have the lower barriers impacted the unique benefits of alternatives for these investors?
Robert Walter: The democratization of alternative investment strategies continues to evolve and mature, as do the needs of high-net-worth and ultra-high-net-worth clients. And even though there are lower barriers for some alternative asset classes such as Private Credit, Private Equity and Real Estate, the complex needs of our wealthiest clients still require unique solutions where high barriers still exist. Whether it’s a co-investment, a complex tax strategy or a customized solution for a family, these investments often contain capital call structures with high minimums. With that said, we are still seeing high demand and increased allocations in lower barrier strategies from many clients. The benefits of these strategies, including diversification and upside growth potential, are more relevant than ever and asset class overall is performing well.
AW: What specifically are elite advisors looking for in an alternative platform? How has that changed in the past five years? What do you think will change in the next five years?
RW: Elite advisors are seeking a robust platform that integrates and leverages innovative technologies, allowing them to elevate the service they provide clients. They want access, customization and education on the products. They expect an intuitive platform where they can easily sort through offerings and access key product information. They want to engage the investment team’s expertise and leverage their data. They want support when it comes to educating clients and ultimately investing in these offering in the most seamless manner possible.
During the past five years, new platforms have emerged and they’ve streamlined a once cumbersome, paper-based subscription process that took weeks to complete into one where advisors can easily access and invest in products digitally in hours. This has transformed the way alts make their way into the asset management ecosystem and has allowed advisors to increase their allocation to these strategies while expanding their business.
The next five years are going to be about technology. When I think about the impact of AI and blockchain, I expect a significant change to the ease of doing business on alternative platforms over the next five years. The result: easier — and more efficient — ways to invest in alternative strategies.
AW: Do you expect any significant shifts in regulatory oversight related to alternatives in the coming years?
RW: I would hope so. As technology continues to evolve and more alts products come to market, demand will continue to increase. Alternatives will play an even larger role in the portfolios of retail investors and I expect there will be significant shifts in regulatory oversight. Alts remain a complex investment option that isn’t suitable for every investor. Both advisors and regulators will need to adopt new procedures and cyber policies as artificial intelligence and new settlement systems mature in order to supervise, provide proper oversight, and protect the investor.