Alternative investments: Tips on speaking with your clients

The need for investment diversification is greater than ever. The extended low-yield environment has erected a roadblock for those seeking returns on bonds and cash investments. To counter this, many advisors are looking to rebalance client portfolios to include at least 20 percent in alternatives.

Traditional investors sometimes are stuck on the 60/40 split of stock and bonds. So what are the best ways for advisors to approach investors with alternatives?

Jason Plucinak

Here are three tips to help start that conversation:

  1. Present easy-to-understand alternatives.  Complexity is your enemy. If your options have stories that clients can relate to, it will help them feel more attached to the investment.
  1. Transparency is key. Even the most trusting clients aren’t (and shouldn’t be) willing to invest their hard-earned dollars in something that isn’t completely transparent. Point your clients to offerings that are publicly registered and have public, audited financials.
  1. Follow up with written details — online or off. Talking through the details in an initial meeting is a great start, but following up with additional info can support your client’s decision by confirming what they heard. Always include the investment’s official prospectus and be sure you are following your firm’s compliance and advertising guidelines.

If your website features a client portal, create a webpage devoted to specific alternatives you recommend. Include a few clear bullet points on each offering, along with your professional thoughts, together with links to relevant articles. If you don’t have access to a firewalled content area, you can provide the same information in a handout or brochure for your client to take home.

Regardless of how you deliver the information, don’t try to sell the product. Instead, provide the research and information your client needs to make a well-informed decision.