I spoke with Shannon at the 2022 CAIS Alternative Investment Summit in Beverly Hills about how she and her team manage a shared service model, as well as how alternative investments are helping their advisors offer more value to a wider variety of clients.
“Knowing where the market’s going.”
Four major wealth management firms. 11,000 advisors, including independent RIAs. $450 billion in AUM.
That’s what Shannon and her 30-person team are tasked with managing, from due diligence on individual investment products to the tech platforms that advisors use. How do they balance what’s good for Advisor Group with what’s good for individual advisors at such a massive scale?
“The way the world used to be, a local wholesaler might have gone into an advisor’s office and pitched them on an idea, or an advisor heard about something new,” Shannon says. “And so I think the most important thing is really knowing where the market’s going ahead of time, what type of interest is out there, understanding the landscape competitively, but also where product manufacturers are going and really getting ahead versus the reaction of just hearing demand for certain types of products.”
In other words, Shannon does her homework. She and her team spend a lot of time talking to advisors, educating them about what’s out there but also helping them identify the unique set of products and services that could benefit their individual niches.
“When you’ve met one independent financial advisor, you’ve met one independent financial advisor,” Shannon quips. “They all have a unique set of services that they provide. And so our focus is really on helping them understand our full suite of products and solutions and where they fit and really helping them understand what might make sense. What are you trying to solve for? Let’s help you understand what we currently have available.”
“Expanding our menu.”
In 2022, what many advisors are trying to “solve for” are the limitations of the traditional 60/40 portfolio.
More and more advisory firms are starting to see alternative investments as an important part of the solution. Through various iterations of the company, Advisor Group has a long history of offering alternative investments to advisors and their clients. Shannon says working with CAIS allows her team to help more advisors keep pace with the trend towards expanding alternatives beyond wirehouses and ultra-high-net-worth individuals.
“I think what we’ve seen as a major shift is more institutional quality managers continuing to get into the alternatives space,” Shannon says, “and also the creation of products that provide more accessibility to clients. That’s something we have to watch out for across the board. Products continue to morph, evolve, get more complex. And then certainly a trend that I think is growing is wanting to offer alternatives within a fee-based relationship and move from just traditional brokerage structures of the product. And so now firms like ourselves, we may have this bucket of complex products. What brought us to CAIS was the interest to expand our menu and move more upmarket.”
Another important part of the alternative trend is that it’s cresting due to a simultaneous rise in both supply and demand. Firms like Shannon’s have more products to offer, and folks on Main Street who are worried about inflation and a potential recession want to know where else they can invest while the markets continue to correct. That’s prompting more forward-thinking advisors to offer clients and prospects things they may not be able to buy from the proverbial firm across the street.
“As the markets continue to evolve, there is a need for these types of assets that provide different types of correlation to the market,” Shannon says. “The majority of our advisors are saying, What makes the most sense to incorporate in my business? What we’re trying to do is say, How can we help, both the largest ensembles have access to something where they may not need our investment expertise. And then also helping our advisors that are independent solo practitioners and giving them access to these solutions, but also giving them the training and the tools to support them as well.”
“Confidence and competence.”
For advisors who are just getting their feet wet with alternatives, the breadth of perspectives you can access by working with a firm like CAIS or Advisor Group is invaluable. That expertise can also help educate advisors and their teams about new products and clear some likely hurdles with compliance and due diligence.
But in this unsettled market environment, the biggest advantages that advisors will find in the alternative space are new answers to the predictable client questions. “Stick to your plan” only goes so far for a 65 year old who doesn’t feel secure about retiring anymore, or a 25 year old who’s skeptical about investing in the first place. The more options you can provide to clients, the more valuable your services will feel. And as you become more comfortable with these emerging asset classes, you’ll also have a new set of skills and expertise that might take your business up a level.
“We have a focus on helping our advisors not only have the confidence but the competence to go up market,” Shannon says. “What that means is really helping them understand a full suite of strategies that they would want to consider to really meet the needs of higher-net-worth clients. Some advisors feel that when they’re in an existing relationship that’s going to continue to move up market that they really don’t know what to do and where to go. So it’s about ensuring that we have partners and we have the services that can help them as it relates to alternative investments. It’s just understanding what the client need is, what are they trying to solve for, and what are the right options.”
Want to view more content from CAIS’ Alternatives Investment Summit? Sign up for their learning platform, CAIS IQ.