Trends Watch: Opportunities for Advisors
August 27, 2020
By Elana Margulies-Snyderman
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Jon Robinson, Co-Founder and CEO, Blueprint Investment Partners.
What is your outlook for alternative investments?
In our estimation, the starting point for analyzing the path for alternatives going forward continues to be around transparency and fees. With increased equity market volatility likely comes reinvigorated demand for alternatives. However, with Regulation Best Interest (Reg BI) having a major influence on representatives and hybrid advisors, and the increase in market share for the fully independent advisor, the hurdle for what is currently available or accessible is likely to increase going forward.
From a performance perspective, the market environment in 2020 has thus far provided a unique set of facts for alternatives. On the one hand, global equities have experienced significant volatility and large drawdowns. Generally speaking, this represents a market environment where alternatives should outperform. On the other hand, the context for these moves has been one that is largely unprecedented in market history. So, the question is how does one go about critically analyzing “good” vs. “bad” performance? One thing is certain – alternatives that did not provide diversification during the “coronacrash” that maintain above average fees will be under severe scrutiny.
What are the greatest opportunities you see and why?
Both for Blueprint and the financial advisors we serve, the biggest opportunity I see right now is the chance to differentiate oneself from the pack. Oddly enough, the COVID-19 situation has been the catalyst. It has exacerbated the problem for advisors who are challenged by how to modernize their practice.
Our society was on-demand even before the world shifted from offices and “let’s do lunch” cafes to home offices and kitchen tables. But since most advisors didn’t run their business in an on-demand way, it became a crutch for the collective group, with few advisors feeling enough heat that it would force them to evolve. But now, if someone can join an online yoga class from their living room, why can’t they receive information from their advisor in a similar way, through contemporary means like videos, blogs, and infographics?
The point is, there’s tremendous opportunity right now for advisors who want to stand out. They accomplish this by evolving their practice to support spending more time and energy on client service and business development.
For us, as an asset manager, there’s a parallel opportunity. It’s that we can stand out from our peers by accelerating our focus on helping advisors manage their businesses.
What are the greatest challenges you face and why?
Everything I just said about the benefits of modernizing to meet the needs of an on-demand society comes with an equal and opposite reality: as everyone and everything has shifted to digital, there’s so much more noise out there, and it’s even more challenging to grab someone’s attention.
For us, the challenge is capturing the attention of advisors; and for advisors, it’s capturing the attention of their potential clients. But in the end, it’s the same problem.
I think the solution is building a culture based on adaptability. To me, this means being willing to experiment with new formats and platforms in order to meet people where they already are and provide information in a way that resonates with the person you’re trying to reach. Let me be clear though: I am not advocating for a spray and pray approach. I’m a firm believer in quality over quantity.
What keeps you up at night?
The main concern that keeps me up at night is the continued belief that stocks “always come back.” This belief has been encouraged since the 2008 global financial crisis and further reinforced by the v-shaped market recovery this year. The fact is that, without unprecedented Fed and government intervention, the February-March drawdown in U.S. equities (which reached 35% in the S&P 500) could very easily have been much worse.
I am not suggesting that future market environments are subject to prolonged periods of flat to negative performance, though we have experienced those in the past. What I am suggesting is that investors need to build into their assumptions a reasonable expectation of both the reward AND the risk in higher risk assets like stocks. The last ten years in market returns and risk are not a guide for the next decade, and unless accounted for ahead of time, investors may realize an inverse experience. Not accounting for this possibility through proper risk management can have grave consequences for investors, particularly those near or in retirement and whose livelihoods largely depend on their investment portfolio.
The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper LLP.