Practice Management January 3, 2023

Education Options for Alternative Investments Expand

As alternative investments grow in popularity, so do programs to educate and assist advisers looking to discuss them with clients.
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Art by Changyu Zou


Alternative investments are not widely available in defined contribution plans. The Defined Contribution Institutional Investment Association (DCIIA) Retirement Research Center 2022 Custom Target Date Fund study found relatively little use of alternative asset classes, which the study labels as “diversifier allocations.” According to the study, the most commonly used diversifiers include global tactical asset allocations (4%) and bank loans (3%), followed by hedge funds, private equity, and risk parity (all at 2%). Among all plans, only 15% use a diversifier within their custom TDFs and the “vast majority allocate to just one diversifier,” the study found.

But given 2022’s investment results for traditional asset classes, it’s not surprising that advisers are seeking to learn more about alternative assets. An October, 2022 survey of independent financial advisers, asset managers and other industry professionals by alternative investment platform CAIS and Mercer found 88% of advisers plan to increase their allocation to alternatives over the next two years. Fifty-three percent estimate that their allocation to alternatives will make up more than 15% of their overall client portfolios.

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“The expectation of lower returns in the coming years, coupled with higher structural interest rates and inflation, has created a voracious appetite for alternative, uncorrelated sources of return,” says John Bowman, executive vice-president of the Amherst, Mass.-based Chartered Alternative Investment Analyst (CAIA) Association.

The Educational Hurdle

Alternative asset managers are responding to that interest. Sixty-three percent of the CAIS/Mercer survey respondents plan to launch new products in the next few years and 46% plan to create new structures, such as interval funds or ‘40 Act liquid alternative funds. Managers’ optimism is tempered by a concern over a lack of education or understanding about their products, though—75% cited that lack of knowledge as an obstacle to alternatives’ adoption.

The report notes that there is an abundance of educational industry content available but cautions that “it’s sometimes hard to discern what’s important to know about each asset class, investment structures and the specific funds they’re considering.” Suggested solutions to the knowledge gap include online learning platforms that are designed to distribute the most relevant information and useful insights.

Educational Platforms

Several organizations provide alternatives education. New York City-headquartered CAIS provides advisers a wide range of alternative investments for clients and education about alternative asset classes. According to the CAIS website, the platform offers access to multiple strategies, including “hedge funds, private equity, private credit, real estate, digital assets, and structured notes.” Advisers can also create customized funds. Mercer provides independent due diligence and ongoing monitoring of funds listed on CAIS.  

On the education side, CAIS offers the CAIS IQ self-paced learning system. According to the company’s website, “CAIS IQ courses are created with curated independent expert content to help advisers master key information about asset classes, product providers, and specific funds and products.” Courses use an adaptive learning system designed to increase each user’s learning speed and improve retention. The organization also hosts the CAIS Alternative Investment Summit.  

The CAIA also offers multiple educational programs. Advisers seeking to earn a professional designation can pursue the CAIA Charter, which requires passing two levels of qualifying exams and relevant professional experience. The exam-preparation curriculum covers a range of alternative asset classes and portfolio management. The charter is recognized globally, with over 13,000 charter holders in more than 100 countries, according to Bowman.

In April 2022, the CAIA announced the launch of UniFi by CAIA, a self-paced alternatives-learning platform that is separate from the charter program. Per the organization’s press release: “UniFi by CAIA will allow participants to complete a series of online modules in a number of key alternative investment categories, such as private equity and private credit.” Participants will be able to earn certificates in the fundamentals of alternative investments, private debt and digital assets. Bowman reports that over 10,000 participants have completed the capstone fundamentals course.

Institutional Capital Network (iCapital), an alternatives investment platform based in New York City, regularly updates its site with articles and blog posts featuring news and educational articles. For example, recent posts discussed private market fund fees and structured products. iCapital teamed with CAIA in early 2021 to develop AltsEdge, a ten-part educational program that covers the primary alternative asset classes and portfolio construction.

Other organizations are getting involved with educating advisers’ on alternatives. AltsDb in Fort Worth, Texas produces podcasts, newsletters and hosts online events for both advisers and accredited investors. Andy Hagans, co-founder, describes the company as an independent media platform covering the U.S. alternatives industry and the publisher of The Alternative Investment Podcast.

Hagans says AltsDb was founded in the fourth quarter of 2021 and traffic to the site started spiking in 2022’s first quarter. He cites attendance at the firm’s virtual 2022 Alts Expo in early December as an example of the growing interest in alternatives. “We were expecting 400 to 500 participants,” he says. “We had nearly 600 participants register, so that definitely exceeded expectations.” AltsDb archives its event presentations, podcasts and webinars on its YouTube channel. Alternative investment product issuers provide sponsorship, speakers and educational content, Hagans explains.

In late November of 2022, the Franklin Templeton Academy announced the launch of its Alternatives Education program for financial advisers. The program includes courses on private equity, real estate, private credit, infrastructure and hedge strategies. According to the company’s press release, the program will include “in-person and on-site classes, interactive webinars, self-paced e-learning modules, and pre-recorded video. The program also offers background sheets and workbooks to supplement and bolster the learning experience. Course content is developed and delivered by experts in the alternatives industry.”

Fiduciary Exposure

DC plans are more likely to access alternatives through a fund in their lineup versus a direct investment option. But as the DCIIA study highlighted, the average current exposure to alternatives is low. So, is it still important for product suppliers and education platforms to educate advisers, participants and sponsors about alternatives if they’re only embedded within funds?

“Sponsors should have a working understanding on what is in their funds, managed accounts, target date products, etc.,” Bowman maintains. “As the main liaison to the client, they are obligated to be able to grasp and effectively communicate the characteristics and risks of each portion of the portfolio.”

Hagans agrees. When things go sideways, as with black swan type of events, that’s when their understanding matters, he says: “If I’m an RIA, especially if I’m a fiduciary, I want to understand what is owned within any underlying fund. And I think with alternatives, they tend to be more complex and there tends to be more of an education gap there.”

Practice Management December 5, 2022

The Future of Retirement Income: A Q&A With Endeavor Retirement’s Bonnie Treichel

ERISA attorney and the chief solutions officer of Endeavor Retirement Bonnie Treichel discusses the past, present, and future of retirement income.
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Bonnie Treichel

Bonnie Treichel is an ERISA attorney and the chief solutions officer of Endeavor Retirement. She is also serving as a subject-matter expert for the Retirement Income Consortium, helping to develop the curriculum for webinars on retirement income. PLANADVISER spoke with Treichel on trends she is seeing in getting retirement income into plans, the need for adviser education, and why she’s passionate about the subject.

PLANADVISER: What trends are you noticing in retirement income?

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Treichel: The concept of in-plan retirement income is not new, but with the SECURE Act of 2019 and the new safe harbor that passed, we’re seeing a new birth to retirement income solutions in plans. Many insurers and asset managers are now focused on solving the retirement income problem.

We have a convergence of the retirement plan industry bringing solutions to the table, alongside the Department of Labor and other regulators and legislators wanting to focus on it.

PLANADVISER: Who will benefit most from the efforts in the industry?

Treichel: People are recognizing that those with a retirement account balance of $500,000, for example, need help solving for retirement income. Those with higher balances, let’s say $1.5M to 2M will most likely work with wealth managers. The industry is probably not going to be able to help those who are low on assets, like only $100,000 or $200,000 in savings.

There’s a big gap in the middle where people will not have enough with social security, relying solely on the market may be problematic, and they won’t have access to a wealth manager.

PLANADVISER:  What’s the main problem faced by people in that gap?

Treichel: Some folks will overspend in retirement, but others will underspend because they don’t have access to their own personal adviser. In both camps, it’s problematic. People might be living scared, thinking they can’t afford things, while others are going out and buying the boat.

PLANADVISER: What is the role of advisers in addressing this problem?

Treichel: From my perspective, those who are skeptical in this are advisers.

They’re saying, “Hey, wait a minute. These solutions are too complex. And they’re too expensive.” Advisers tend to equate the solutions with annuities, which have lots of headlines about being expensive.

If this is ever going to stick with plan sponsors, it’s going to be the advisers making that happen. I’ve spent a lot of time trying to educate them. In-plan solutions are much different than a retail annuity. And in-plan solutions are not taking clients away from wealth managers.

One of the criticisms is the complexity of the solutions. Some are guaranteed. Some not. Some are hybrids. Some are wrapped in CITs (collective investment trusts). All this has to be compared.

PLANADVISER: Where can advisers turn to learn more?

Treichel: We are definitely seeing a demand for training in retirement income. Advisers can take part in in-depth webinars on retirement income at the Retirement Income Consortium.

Whenever there’s something new in the industry, where you’re trying to impact change, we first have to coalesce around some common vocabulary and nomenclature. Then we need education to the advisor and consultant market. Right now, the education component has begun in larger plans. And later that will trickle down to smaller plans.

Then at some point, the focus will turn to not only getting these solutions into plan menus but making them the default choice. That will be the second wave of focus and education.

PLANADVISER: What is your personal motivation for your engagement?

Treichel: Change takes time and change is hard. I personally have passion around this topic. The thing about solving the retirement income gap is that it can impact so many people. With this concept, we can help create a more dignified retirement for the masses.

PLANADVISER: Do you have any numbers about implementation?

Treichel: From a webinar hosted by Broadridge and sponsored by The Standard and Fidelity Institutional Insights, we see that:

  • 20% of plan sponsors began offering an in-plan annuity option over the past two years, and another 23% plan to do so this coming year
  • 19% of plan sponsors began offering an income replacement fund the past two years, and another 23% plan to do so this coming year

This is based on a survey of 1,285 plan sponsors across multiple recordkeepers, not just Fidelity. 67% of the plans hold more than 50 million dollars in assets. The data was collected in early 2022.

I think this shows that the area is still immature, but that traction is growing and that it is a priority. 

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