Using Alternative Investments to Enhance Your Brand
Whether you run a tech start-up, the newest restaurant in the city, or a financial advisory, growing your business will always be a top priority. As an advisor, you are likely inundated with materials every week telling you how to create or develop your brand to attract new clients. This is no doubt an important endeavor and you are smart to allocate resources to its execution. That said, we at Marrs Group have noticed a subset of advisors who are well-positioned to differentiate themselves in these uncertain times, but who have largely failed to do so.
We recently conducted an extensive research campaign into fee-only RIAs for an event we are hosting this spring. Sorting through over 5,000 websites and ADVs, we were primarily focused on finding RIAs whose stated investment philosophies included alternative investments. We noticed two trends we found alarming.
First, an overwhelming majority of firms promote nothing but passive, low-cost ETF/mutual fund strategies. While there is nothing inherently wrong with a passive strategy, you have to ask yourself if it is currently prudent to present a prospective client with a set-it-and-forget-it mix of domestic equities and fixed income. Indexes are at an all-time high, a strong dollar is affecting international exposure, and looming rate hikes are depressing bond values. No secret, but what are you doing about it?
We are firm believers in active or "hybrid" management because you need to be flexible in changing times and you need to have non-correlated alternative investment positions that encompass a range of asset classes, liquidity timelines, and income profiles. A majority of what we consider true alternatives cannot be accessed via a passive or automated strategy. These investments will shine through again when the current historic bull run comes to an end, and we are weary of strategies that are not positioned with this in mind.
No matter how passive or how low-fee you are, it will hurt your account if we see a correction. We are in an unprecedented time when a simple tweet can move the market. If a correction does happen, it will bring active management and the use of alternative investments back into the forefront. Wouldn’t it make sense for investors to position for that now rather than after a correction has occurred like most retail investors do?
These beliefs are what brought us to our second finding, which is that firms who share our views, and use an array of alternative investments, very rarely promote this strategy in their marketing materials. Too often we come across the use of alternatives buried deep in an RIA's ADV but the fact never even makes it onto the company website. Are we scared to talk about big bad hedge funds or illiquid real estate partnerships? We propose that you do the opposite. Market your use of alternatives loud and clear. This is the opportunity to create your brand, be ahead of any potential market downturn, and help you capture the assets you are after.
Alternative investments are not for everyone but more and more investors are seeking them. The growth in alternatives in the next five years is expected to be huge. The evolution of alternative structures is also becoming more and more investor friendly. There are new fee structures, investment vehicles, and various lock-up periods that are creating an opportunity for almost all investors to take advantage of alternative investments.
RIAs that currently use alternative investments have a huge opportunity to brand their firm. As the RIA channel expands and consolidation creates larger and larger advisories, branding will be crucial for firms that want to continue to differentiate themselves. As business owners, we can attest to the fact that branding is not an easy task, but when given a chance like this it is important to be nimble and take advantage of the opportunity.
