In April, managed account provider Curian Capital released its annual survey of advisors’ attitudes about the future. No surprise, most mentioned alternative investment and tactical allocation strategies as keys to client success in a still-turbulent global economy.
But in the wake of 2008, advisors are also sensitive to criticism about hyping hot, new investment ideas. They recognize the need for non-correlated asset classes in client portfolios, but also that the accompanying due diligence is now more crucial than ever.
Enter Private Client Resources, a Connecticut-based research and reporting firm, whose expertise is in “delivering faster, ever-more accurate data on complex wealth, and doing so with the highest level of client service.”
No fly-by-night outfit is this. PCR counts Goldman Sachs’ James Gorter, former Assistant Treasury Secretary Thomas Healey, as well as Herbert Aspbury, chairman of the board of trustees at Villanova University, as members of its advisory board (among others).
Robert Fiore, president and CEO of Private Client Resources, sat with Investment Advisor for a revealing interview about the alternative space.
What does the increase in the use of alternative investments say about the corresponding need for quality research in the space?
We see a primary need in transparency for the end client, and more and more advisors are looking to distinguish themselves with this transparency, especially post-2008. Pre-2008, client statements and reports were not very detailed or transparent. It looked like something you might receive from an accountant that was largely performance-driven.
Today, clients are looking for a greater level of oversight and governance: to be in partnership with their advisors. For that reason, advisors are looking to be better about explaining what’s going on and the added value they bring to the relationship.
We know that the more sophisticated the client is, the more likely he is to have alternative investments, and [advisors will] need a mechanism for collecting, aggregating and reporting on the alternative investment portion of the portfolio, in conjunction with the rest, which is a science in and of itself.
Managed futures were (and still are) all the rage in the alternative investment sector. Any other trends that you are seeing?
We know that multi-currency strategies are key. It’s necessary for advisors and clients to have the ability to check that box, and it will be increasingly so as time goes by, but we aren’t seeing the adoption of such strategies yet. It’s still too early.
You said alternative investments are more likely to be seen in sophisticated portfolios. Are they beginning to move downstream?
Alternative investments are moving downstream. We have $20 billion in assets in the alternative space, and we’re seeing as much as 40% to 60% of the portfolio in alternative assets.
Who is your main competitor?
Our main competitor is the status quo. Other companies are using software, spreadsheets and people to handle their alternative investment business. But it’s a secondary business for these companies; it’s not what they specialize in. Unseating software and internal processes takes a long time, and you have to be patient. But we are seeing more advisors recognize that outsourcing is the way to go.
You often employ a yoga and mixed martial arts metaphor when describing the company. What gives?
Yoga and MMA require an understanding of one’s strengths and weaknesses. In business, inefficiency, stagnant growth and low profitability can be improved the same way a yoga participant enhances his flexibility and an MMA fighter improves his offensive skills. Repetition and a varied skill set—in the case of business, improving a company’s efficiencies and building client relationships—adapts the body to conquer those challenges the next time they are faced with them. These are the exact methods that have helped PCR excel and continue to rapidly grow.