Expanding Your Practice Through Alternative Investment Management

Advisors across the USA are facing a challenging reality: traditional investment management is becoming increasingly commoditized. With the proliferation of robo-advisors, low-cost index funds, and readily available financial information, the value proposition of offering only conventional stocks and bonds portfolios is diminishing.

As a forward-thinking advisor, you already know this. You've likely felt the pressure to differentiate your services and provide more value to your high-net-worth clients. This is where alternative investments enter the picture – not as a replacement for traditional investments, but as a powerful addition to your advisory toolkit.

There is a $30 trillion wealth transfer from Boomers to Millennials that's currently underway and it’s reshaping client expectations. Modern clients aren't just looking for someone to manage their stock portfolio – they're seeking comprehensive, proactive guidance across their entire financial picture.

Meanwhile, the red ocean of traditional investment management keeps getting more competitive. As one recent industry survey revealed, 77% of advisors are experiencing burnout while growing revenue at a sluggish 5% annual rate. This is the reality of competing in that crowded space of selling one-off investments detached from a client's broader wealth picture.

The question becomes: How can you stand out in this environment while adding genuine value for your clients?

Why Alternative Investments Matter for Advisors

Alternative investments – including private equity, real estate, commodities, hedge funds, venture capital, and structured products – offer several compelling advantages:

1. Enhanced Returns: Many alternatives have the potential to generate higher returns than traditional investments, particularly in low-yield environments.
2. Improved Diversification: Alternatives often have low correlation with public markets, providing protection during market downturns.
3. Access to Innovation: From cryptocurrency to startup investments, alternatives provide exposure to emerging technologies and business models.
4. Exclusivity Factor: High-net-worth clients appreciate access to investments not available to the average investor, reinforcing your value proposition.
5. Tax Efficiency: Certain alternative investments offer significant tax advantages that traditional stocks and bonds cannot match.

But despite these benefits, many advisors hesitate to incorporate alternatives into their practice. Why?

The Challenge of Going It Alone

Implementing alternative investments presents several significant challenges:

• Extensive Due Diligence: Proper vetting of alternative investments requires specialized knowledge and resources.
• Limited Access: Many of the best alternative investment opportunities are available only through established relationships and networks.
• Regulatory Hurdles: Navigating the complex regulatory landscape surrounding alternatives demands specialized expertise.
• Client Education: Explaining complex alternative investment strategies to clients requires deep knowledge and communication skills.
• Operational Complexity: Managing alternatives often involves complicated subscription processes, capital calls, and reporting requirements.

Attempting to overcome these challenges independently would require substantial investments in time, education, and resources – essentially becoming an expert in multiple new domains simultaneously. This approach is not only impractical but also diverts your focus from your core strengths.

The Team-Based Model: Collaboration as the Solution

This is where the Team-Based Model shines. Rather than trying to become an expert in every aspect of alternative investments, you can leverage partnerships with specialists who already possess the necessary expertise.

By partnering with CPAs and connecting to a Virtual Family Office (VFO) of specialists, you gain immediate access to professionals who understand the nuances of alternative investments. These specialists can help with due diligence, provide access to exclusive opportunities, navigate regulatory requirements, and assist with client education.

The Virtual Family Office Advantage for Alternative Investments

Within Elite Resource Team's Virtual Family Office, you'll find specialists dedicated to various alternative investment and wealth protection strategies. A few examples include:

Real Estate Alternative Investment Specialists

ERT’s VFO includes experts in real estate-based alternative investments who provide high-net-worth clients with access to sophisticated tax-advantaged investment strategies, including:

• 1031 Exchanges using Delaware Statutory Trusts (DSTs): These allow investors to defer capital gains tax while exchanging real property for institutional-quality assets without management responsibilities.
• 721 Exchanges (UPREIT Transactions): A tax-deferred strategy where investors exchange real property for operating partnership units of a REIT, offering diversification and long-term exit strategies.
• Opportunity Zones (OZ): These investments allow clients to defer almost any type of capital gain by investing in qualified opportunity zones, with the remarkable benefit of tax-free growth after a 10+ year holding period.

These VFO specialists help accredited investors access institutional-quality alternative investments that offer both tax advantages and the potential for income and appreciation.

Solar Investment Specialists

The VFO includes clean energy finance experts who provide high-net-worth clients with innovative tax mitigation strategies through solar energy investments. 

This alternative investment approach allows clients with a minimum of $100,000 in federal tax liability to essentially repurpose their tax dollars into ownership of solar energy assets. The strategy generates both tax credits and depreciation expenses, potentially delivering immediate tax savings of 10-23% while supporting ESG (Environmental, Social, and Governance) objectives. 

What makes this strategy particularly attractive is that clients can implement it with essentially no out-of-pocket expenses, as they're simply redirecting funds that would otherwise go to the IRS. This approach has historically been utilized primarily by major financial institutions but is now available to private clients through VFO specialists.

Project Funding Specialists

The VFO includes specialists who coordinate with exclusive lenders to provide funding for major projects ranging from $100 million to over $5 billion. This specialist capability focuses on prime, shovel-ready projects across various industries including renewable energy (solar, wind, hydro power, geothermal), infrastructure, commercial real estate, sustainable real estate, oil and gas, LNG, telecommunications, and ESG (Environmental, Social, and Governance) projects. 

Their expertise covers projects in the U.S., Canada, and select European countries including the UK, France, Germany, and others. For advisors with clients involved in significant development projects, this alternative investment capability offers a valuable resource for securing project funding through a self-contained process that handles everything from client introduction through successful funding completion.

The Choice: Struggle Alone or Thrive Through Collaboration

Consider the contrast between two approaches to incorporating alternative investments:

The Traditional Approach:
An advisor attempts to become knowledgeable about all aspects of alternative investments independently. They spend countless hours on research, struggle to gain access to quality opportunities, and face significant compliance and operational challenges. The process is inefficient, and the advisor's core business suffers from neglect.

The Team-Based Model:
An advisor leverages partnerships with CPAs and VFO specialists to access alternative investment expertise. They maintain focus on their strengths while offering clients expanded services through collaboration. The approach is efficient, scalable, and delivers superior client outcomes.

Moving from Red Ocean to Blue Ocean

By incorporating alternative investments through the Team-Based Model, you're not merely adding another product to your shelf – you're fundamentally transforming your value proposition.

You shift from competing in the crowded red ocean of traditional investment management to the blue ocean of comprehensive wealth advisory. Your services become less commoditized and more personalized. You're no longer just managing investments; you're coordinating a team of specialists dedicated to optimizing every aspect of your clients' financial lives.

The modern client seeks a comprehensive, proactive firm that advises on all facets of their financial life – from investing and saving to estate and tax planning. By embracing the Team-Based Model and incorporating alternative investments through collaboration, you position yourself to meet these expectations while escaping the commoditization trap.

If you're ready to expand your practice through alternative investment management:

1. Evaluate your current client base for those who might benefit from alternative investments
2. Identify specific alternative asset classes that align with your clients' needs and goals
3. Connect with Elite Resource Team to learn more about Virtual Family Office specialists in alternative investments
4. Begin the collaborative journey toward offering more comprehensive, differentiated investment services

The future of financial advising isn't about trying to do everything yourself – it's about building the right team to serve your clients' evolving needs. By leveraging the Team-Based Model and a Virtual Family Office, you can confidently expand into alternative investments, providing greater value to your clients while growing your practice in the blue ocean of opportunity.