Traditional retail asset managers are expanding into alternative investments via both acquisitions and product launches, causing them to face challenges in adapting their distribution strategies, Cerulli says in “Cerulli Edge—The Americas Asset and Wealth Management Edition,” released on Thursday.
Among asset management firms offering alts, 54% are using a distribution strategy in which advisor-facing alternative product specialists support generalist wholesalers, according to Cerulli. Of the same group, 26% depend solely on a generalist wholesaler and 15% use only an alts-specific wholesaler.
Only 6% of those asset managers are using an alts-specific wholesaler that shares territory with a generalist wholesaler, according to the report.
“Marketing to financial advisors often requires a depth of knowledge that many wholesalers aspire to but may not actually possess,” the report said. “Effective partnerships with product specialists can help wholesalers enhance service quality and satisfy advisors’ needs for more extensive product know-how.”
Data in the report “comes from our annual online survey of distribution teams that was conducted last spring and includes participation from over 100 asset managers,” according to Noah Serianni, Research Analyst, Wealth Management at Cerulli.
“One significant finding from this research is that advisor education is the primary challenge for asset managers distributing alternative investments, even as demand continues to rise,” Serianni told Wealth Solutions Report by email.
“The popularity of the generalist-specialist approach to distributing alternative products highlights how firms are addressing this challenge by emphasizing product expertise within their distribution teams,” he said.
He added, “As alternatives continue to gain traction in advisor portfolios, product specialists have become increasingly important to the success of alternative investment distribution efforts, giving advisors greater access to specialized expertise alongside their primary wholesaler.”
“While 61% of distribution team members believe it is important for an advisor to consult a product specialist before investing, only 44% of advisors concur,” the report said. But it adds that “both agree on the significance of speaking to a portfolio manager, with 40% of distribution team members and 38% of advisors” saying that is important.
“One of the largest hurdles for managers is how to build or blend distribution teams to provide advisors the best client service,” according to Andrew Blake, Associate Director.
“Although resources vary significantly among firms, the mix of approaches shows a lack of a clear industry best practice.”
Cerulli said asset managers should bolster their alternatives distribution capabilities for high net worth-focused advisors by integrating product specialists and providing sales teams with data and product information and data to give advisors.
“Wholesalers who collaborate with product specialists are more likely to be perceived as providing superior client service to advisors,” according to Blake.
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
