As client portfolios grow more sophisticated and demand for alternative investments increases, many financial advisors face a critical decision: should they develop alternative investment expertise in-house or partner with specialists? For most advisors, the answer lies in strategic partnerships that can enhance their service offering without overextending their resources.
The world of alternative investments has grown increasingly complex. While traditional alternatives like real estate and private equity remain important, new opportunities emerge regularly in areas like:
Trying to maintain expertise across all these areas while running your advisory practice isn't just challenging – it's nearly impossible. This is where alternative investment specialists become valuable partners.
Consider partnering with a specialist if you're experiencing any of these situations:
Finding the right alternative investment specialist requires careful evaluation. Look for these key qualities:
Once you've identified a potential specialist partner, the real work begins. Structuring the relationship properly from the start can mean the difference between a thriving partnership and a frustrating experience for both parties.
The foundation of your relationship with a specialist starts with the business arrangement. Revenue sharing agreements are common in the industry, typically involving a split of fees generated from alternative investments. These arrangements can range from simple referral fees to more complex sharing structures based on assets under management or performance.
Some advisors prefer a more arms-length referral arrangement, where they maintain complete independence but receive compensation for qualified introductions. This can be an excellent way to test a relationship before committing to deeper integration.
For those seeking deeper collaboration, sub-advisory relationships offer a more comprehensive approach. In this model, the specialist manages specific alternative investment portions of client portfolios while you maintain the primary relationship. This structure often works well for advisors who want to maintain control while leveraging specialized expertise.
Joint ventures represent the deepest level of partnership, where both parties share resources, risks, and rewards. While these arrangements require more upfront work to structure, they can create powerful synergies and significant competitive advantages.
To maximize the value of your specialist partnership, establish regular check-ins to:
For client education, you should work together to:
And for professional development, use the relationship to:
Track these key metrics to evaluate your specialist partnership:
Maintaining a successful long-term partnership with an alternative investment specialist requires more than just good intentions. The most successful advisor-specialist relationships share some common elements that you can implement in your own practice.
First and foremost, successful partnerships are built on crystal-clear expectations. Think of this as creating a blueprint for your working relationship. Sit down with your specialist partner and have detailed discussions about who handles what aspects of the client relationship.
Don't leave anything to chance – document these agreements in writing, even if your relationship is informal. This documentation becomes invaluable when questions arise or when new team members join either organization.
While leveraging specialist expertise is important, maintaining control of your practice and client relationships is crucial. The most effective advisors stay actively involved in investment decisions, even when working with specialists. They participate in investment discussions, understand the rationale behind recommendations, and maintain their position as the client's primary advisor. This doesn't mean micromanaging your specialist partner – rather, it means maintaining enough involvement to have meaningful discussions with clients about their alternative investments.
Regular performance reviews are essential, but don't limit these to just investment returns. Review the overall relationship:
These reviews help identify and address issues before they become problems. Perhaps most importantly, focus on continuously adding value to the relationship. The best partnerships aren't static – they evolve and grow stronger over time.
Look for opportunities to enhance client service, whether that's through joint educational events, improved reporting, or new investment opportunities. Share market intelligence with your specialist partner; they often have unique insights that can benefit your broader practice. Work together on business development initiatives that benefit both parties.
Remember that your specialist partner likely works with other advisors. Standing out as a valued partner can mean earlier access to unique investment opportunities or extra attention for your clients. Simple things like prompt responses to inquiries, well-prepared clients, and organized documentation can make you a preferred partner.
The alternative investment landscape continues to evolve, making specialist partnerships increasingly valuable for advisors. Organizations like Elite Resource Team have pioneered the Virtual Family Office model, which helps advisors have access to vetted specialists across various disciplines. While the decision to work with alternative investment specialists remains yours, having access to a broader team of tax, legal, and financial professionals can help ensure these investments fit properly within a client's comprehensive financial picture.
The trend is clear: successful advisors are moving away from trying to do everything themselves and instead building strategic relationships that enhance their practices. By carefully selecting and managing these relationships, you can:
The key is finding the right balance between maintaining control of client relationships while leveraging specialist expertise to deliver better outcomes for your clients. Remember that working with specialists isn't just about accessing new investment opportunities – it's about creating a comprehensive service model that positions you as your clients' most trusted advisor. In today's complex financial landscape, having the right professional team can make all the difference in your ability to deliver sophisticated solutions to your best clients.