The Alternatives Investment Gap: Why Most Firms Don’t Actually Have a Strategy
Over the past several years, access to alternative investments has expanded dramatically. The product universe has grown to the point where a firm can offer clients exposure to private equity, private credit, real assets, and hedge funds with relative ease.
Access, though, is not the same as strategy. Firms that conflate the two are carrying more risk and leaving more revenue on the table than they realize.
Tactics vs. Strategy: Where Most Firms Stall
When I talk to wealth managers across the spectrum, from large RIAs to regional banks to IBDs and trust companies, I see the same pattern. Firms make the tactical decision to enter the alts space because advisors or clients or both start asking about it. They strike a deal with a marketplace platform and open up access.
There’s nothing wrong with using a marketplace to get in the proverbial door, but most firms stop there. They enter the market tactically, product by product and advisor by advisor, but never step back to design a true program.
They’re offering alts, but they don’t have an alts strategy.
A tactical alts shelf is a collection of products your advisors can access. A strategic alts program is a firm-level answer to five fundamental questions:
What are we trying to accomplish? Alts are not a single asset class with a single purpose. Tax optimization, income generation, return enhancement, and tax loss harvesting are distinct objectives that require different products, different client conversations, and different oversight processes.
Who is this for? A multi-generational family with $30 million in assets has different needs than a mass-affluent client building toward retirement. Through a strategic program, firms define their target client profile and build the product shelf to match.
How do we curate the shelf? You would never tell an advisor "go buy any stock you want." Giving them open access to a marketplace with hundreds of alt products without curation, guardrails, or guidance is functionally the same thing. Firms with true alts programs have a focused shelf: four to six well-defined strategies, each with documented objectives, a clear client fit, and a defined oversight process.
How do we manage this at the firm level? Compliance needs a real-time view of what every advisor has placed every client in, and leadership needs to understand the firm's aggregate alts exposure.
Are our advisors equipped to offer alts? Most are not. Training advisors to recommend an alt product isn’t the same as training them to have a disciplined alts conversation around the liquidity terms, underlying mechanics, or specific client problem the product solves.
Three Levels of Alts Maturity
After working through alts strategies with institutions of all sizes, I’ve developed a simple maturity framework:
Dabbling. The firm offers marketplace access. Some advisors use it, but there's no firm-level strategy, no curation, and no meaningful oversight infrastructure. Compliance has limited visibility into what clients own.
Structured. The firm has defined its objectives, curated a product shelf, and provided advisors with guidance and guardrails. Compliance has an oversight process and there is a reporting solution in place.
Integrated. The firm has moved beyond distribution into program ownership with proprietary model portfolios, firm-branded vehicles, or feeder structures into institutional managers. Revenue from alts flows back to the firm.
The Revenue You’re Not Capturing
Developing an alts strategy is more than a risk management play; it has the power to generate meaningful new revenue.
Management fees, placement fees, and revenue sharing arrangements currently flow to the marketplace platform or to the product manufacturer. A firm with the scale to build or curate its own program captures a significant share of that back.
Beyond fees, there’s the argument for client retention. High-net-worth clients increasingly expect a credible alts program from their primary wealth manager. Firms that can’t deliver often see their best clients move their alts allocation and eventually more to firms that can.
Where Does Your Firm Stand?
Take this short alts strategy self-assessment to identify whether your firm has developed a true program or is operating alts in a purely tactical capacity.