Alternative investments are apparently too complicated to explain to clients, according to 1,300 global financial advisors surveyed by Natixis Global Asset Management.
Advisors recognize that alternative strategies, including hedge funds, private equity and long-short investments, can play an important part of a client’s portfolio, but only one-quarter of them use them regularly. The main reason for staying away is that they are too difficult to explain to clients, the survey found.
Nearly three-quarters of survey respondents said they thoughts sales materials for these strategies needed to be written in plain English.
Many advisors also believe alternative investments are too risky and they have difficulty justifying the expense. Others say they just don’t know enough about alternative strategies to sell them.
The good news to come out of the survey was that nearly half of advisors believe most of their clients understand how much they need to save to meet their lifestyle expectations in retirement, up from 28 percent of advisors who felt that way in 2012. Advisors also are very optimistic about their clients’ ability to provide for themselves in retirement. Only 10 percent of advisors had a negative outlook for their clients.
The Natixis 2013 financial advisor research study is based on fieldwork in nine countries throughout the Americas, Europe, Asia, the Middle East and the United Kingdom. Interviews were conducted online in August and September with 1,300 financial advisors, including 150 in the United States.