A new Jackson National Life survey indicates that advisors are much more interested in using investment alternatives to help offset ongoing market volatility and improve portfolio diversification – but they also need some guided strategies to do so.
According to the survey, more than nine out of 10 advisors expect to increase their use of alternative asset classes over the next year. Among those advisors who anticipate an increase, more than half said they would increase their use of alternatives by 15 percent or more in the next 12 months.
Nearly a third will boost their use of alternatives by 20 percent or more. Of the small percentage of advisors who have not used alternative asset classes to date, more than 90 percent say they are now considering using them.
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"The trend toward alternative asset classes among retail investors has been growing steadily for the past several years and this survey highlights the growing demand for new strategies," said Clifford Jack, executive vice president and head of retail for Jackson. "Over the last decade, markets have experienced record volatility. We're entering a new era of diversification and alternative asset classes are becoming a significant part of that development."
The reason for an increased use of alternative asset classes was consistent among advisors, with nearly two-thirds citing further diversification as the primary purpose. However, the practical use of alternatives was not as clear among respondents.
Understanding of alternative asset classes and clarity on how to use them within client portfolios topped the list of advisor concerns. The contrast between the demand for alternatives and advisor confidence in their proper utilization highlights a specific knowledge gap for product providers to consider.
With alternative use on the rise, guided strategies may become an important part of bridging that knowledge gap for advisors. According to those surveyed, guided strategies from product providers will play a key role in their use of alternatives.
More than 95 percent of respondents said that guided strategies would be very or somewhat important in their construction of client portfolios. Nearly four out of five advisors said they would be more likely to use alternatives if offered within a guided strategy.
"The needs of investors are changing in today's marketplace," Jack said. "Portfolio allocation strategies are evolving beyond the traditional 60/40 model. As financial advisors adapt to these new strategies and rely more on alternative asset classes, product providers must offer the tools and resources they need to meet these demands. The advisors who took part in this survey made it very clear that guided strategies could play an important role in that effort."
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