4 Questions to Ask About Alternative Investments and Wealth Tools

For clients, this can have a pronounced impact on their liquidity and available cash flow, especially if they have millions of dollars tied up in them. If your technology platform doesn’t appreciate that dynamic, it complicates the planning process significantly.

3. What is the quality of the risk tools?

Many of your clients crave alternatives because they want the opportunity to realize gains that may not be available in the equity and bond markets. Others use them to diversify and reduce risk, which is why risk contribution metrics and scenario analysis capabilities are a must.

For instance, you should be able to show clients, ”If you invest in product A and the market goes down 15%, this is what will happen to your portfolio.”

4. Is it business-model agnostic?

Over the years, an increasing number of advisors have become committed fiduciaries. Product sponsors have responded to that shift by designing vehicles that, while not liquid, have higher levels of liquidity than traditional alternatives.

That said, a range of energy and real estate-based projects with a history of producing solid returns — but which have long time horizons and thus require long lock-up periods to be successful — can only be accessed via a broker-dealer platform.

So, as advice-based models continue to gain favor, firms must remember that commission-based products are not irrelevant, even for many high-net-worth clients. That puts the onus on having a tech solution that can accommodate both advice and broker-dealer work.

The best technology solutions in this industry will never replace what you do. Instead, they make your job easier. Part of that is streamlining tasks that would take hours — if not days — to do manually.

But the other part of that equation is providing access to tools and capabilities that facilitate better, more meaningful conversations with clients and, ultimately, improve the planning process. And in today’s world, no platform can purport to do without fully supporting alternative investments.

Andy Aziz is the chief strategy officer with d1g1t, a Toronto-based enterprise wealth management platform.

(Image: Shutterstock)