One of the most significant trends in the investment industry today is a wave of new alternative products being launched in mutual fund wrappers. This has opened a vast, new marketplace for these hedge fund-like strategies which many have coined the retailization of alternatives. Many expect these newer products, often designed to reduce volatility, will take meaningful market-share from traditional, long-only stock and bond funds in client portfolios in the coming years.
To watch an in-depth video of David Greene detailing the specifics of the Alternative Investments course, click the Learn More button below.
What many industry executives agree is missing, however, is the education on these newer, more complex strategies at all levels – including the investor, the advisor, and the fund wholesaler level. Regulators agree, with one FINRA executive recently describing in the Wall Street Journal, that “these more complex products in the hands of retail investors is like giving a six year old a circular saw.”
As you might imagine, FINRA has called on its member firms to provide a heightened level of supervision and training for their Registered Representatives on products using hedge fund and other complex strategies. So the real question is this…what are the steps the industry is taking to ensure these products are well understood and properly positioned with investors and within portfolios?
In our conversations with advisors who work with individuals, as well as those working with foundations and family offices, there is a genuine desire for formal training but few options to address the need. One advisor with a CFA confessed to us that he hasn’t had any formal training on alternatives and hedge fund strategies. He recognized what John Kenneth Galbraith famously said, “One of the greatest pieces of economic wisdom is to know what you do not know.”
At Greene Consulting, we have developed a four-course program that addresses what any investment professional needs to know in order to effectively utilize alternative investments. We’ve partnered on this program with Keith Van Etten, a former National Sales Manager with a top 10 fund company, who also holds the CFP, CIMA, as well as the Chartered Alternative Investment Analyst (CAIA) designation.
We designed the program to deliver four critical skills to the advisor:
- The ability to differentiate between strategies, not just between products using the same strategy. This is very different from the approach that is traditionally used, which is a product-only training approach.
- Understanding the risk unique to these products, including the off-balance sheet and asymmetrical payoff risks. This has also been listed as a key issue by FINRA.
- To be able to set a clear performance expectation under a variety of market environments. Many of these liquid alternative products have only a two-year track record, so advisors really need to go back to the hedge fund universe to fully understand the longer-term performance profile of these strategies.
- The need to understand the portfolio-level impact of adding the strategy to the client’s portfolio, so they understand what’s the purpose and where should the advisor source the allocation from.
This education program does all of that, and offers mutual fund companies a comprehensive, yet very practical, way to educate their wholesalers who will be at the forefront of the education process. For broker-dealers, this program can be used to train advisors – even to certify them – on their knowledge in these complex products, to make them more effective at educating their clients. And, in addition to supporting their professional development, the program can be a strong part of your overall compliance efforts.
We invite you to learn more about the program, explore the content, and learn how this program can be customized, and even branded, for delivery at your firm. You can call us at 404-324-4600, or click the “Learn more” button above for more detailed information.