A guide to assessing solutions to meet rising demand from high net worth clients

May 17, 2011 — 2:46 PM UTC by Matthew Brown


Matthew C. Brown is co-founder and managing principal of CAIS.

To remain competitive, RIAs must include in their overall wealth advisory offering a comprehensive alternatives investment solution to attract and retain their most valued clients.

Leading RIAs can gain a competitive edge by implementing an end-to-end platform solution that includes products, systems and services that rival the wirehouse model, without incurring the substantial costs and administrative burdens.

As the growth of alternative investments regains momentum within the HNW community, a growing number of RIAs hope to satisfy client demand by accessing the same large-scale infrastructure and support offered by large wirehouses. The challenge is to offer a comparable wirehouse solution without incurring the costs associated with each essential component: due diligence, education and product support, open- architecture custody and reporting integration, access at lower minimums, streamlined execution and competitive vendor pricing. See: Buy alternative investments and get over Madoff, especially as interest rates threaten to rise: columnist.

For most RIAs, outsourcing to a reputable vendor that offers an independent, end-to-end alternatives solution makes the most sense. This approach saves the time and cost related to building an internal platform and avoids the conflicts associated with accessing a competitor’s platform. For advisors who plan to break away from large institutions and join emerging independent firms, or who become sole proprietors, a bundled infrastructure with A-Z functionality allows for a more cost effective and seamless transition.

The most critical challenge lies in finding the right vendor. Few offer a complete solution or even meet the requirements and needs to gain advisor and client trust. You should consider these key aspects when evaluating an alternatives investment platform. See: Schwab leads effort to create industrywide solution for alternative assets.

Due diligence

RIAs must perform investment and operational due diligence on all alternative funds prior to making a selection. It is a meaningful and necessary undertaking to build and maintain a quality due diligence process, so advisors should think about leveraging their time and resources by utilizing platforms that incorporate an independent, third-party due diligence process to supplement internal efforts.

Custody and Reporting Integration

Reporting integration and asset recognition for alternatives is critical. For most RIAs and independent advisors, it becomes problematic if alternative investment funds don’t appear within the reporting architecture or are not recognized by your custodian. A platform that supports open-architecture reporting to multiple custodians, such as Pershing Advisor Solutions, Fidelity Institutional Wealth Services, J.P. Morgan and Schwab Advisor Services, as well as to selected third-party reporting vendors, reduces the cost and potential errors of manual inputs and enables investments to be recognized above the line. See: Pershing is working to create a better alternative assets experience

Fund Access

It is critical for advisors to have the ability to choose from a broad menu of pre-qualified funds in order to allocate assets in reasonable investment denominations. Selection and access allow them to be more flexible and opportunistic when designing client portfolios. Without a platform solution that offers this feature, advisors may experience issues associated with limited manager diversification and encounter large investment minimums.

Product support and education

Advisors require continuous product support and education on funds, strategies and manager information, as well as general industry education. Without such information, investment selection can be more challenging. An alternatives investment platform solution should provide access to manager information. This makes it possible for RIAs to reap the same benefits available to institutional investors so that they can make better investment decisions.


A streamlined and simple subscription documentation process eliminates cumbersome paperwork for the end client. Because every fund requires a subscription document and an offering memorandum, the solution must have the ability to create a master subscription document for the entire platform of funds. In this way, the client simply checks the box for the selected funds, and the advisor can review one subscription document. This eliminates the costs of reviewing the varied documents for every fund.

Vendor pricing

Engaging the various vendors that support an alternatives effort can be costly and time-consuming. Administrators, custodians, auditors, legal counsel, due diligence providers and other key players can take an enormous financial toll on RIAs. A platform solution that consolidates services and leverages its strength to obtain institutional-level pricing for the benefit of the advisors eases the burden.

RIAs and independent advisors want the opportunity to attract and retain a broad base of clients by offering a complete, institutional alternatives solution. The right platform can reduce costs, leverage time and resources and put you in a position to compete for the most valued clients.

Matthew C. Brown, Co-Founder and Managing Principal of CAISfunds, is responsible for overall firm strategy, management and business development. He is a managing principal of CAIS Capital LLC, a FINRA registered broker dealer. Mr. Brown has 20 years of experience in financial services with a focus on global marketing and distribution of alternative investment funds. Over his career, Mr. Brown has built and managed investment firms and platforms and has represented industry leading investment managers.

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