FUNDFIRE – Advisor Platforms Add Gold, REITs, Alts Options

By Tom Stabile
March 18, 2013

Advisor Platforms Add Gold, REITs, Alts Options

The independent advisor market is bustling with new options to more easily access alternative investments, build broader product menus, and better integrate these strategies into client portfolios. Various announcements from recent weeks are pairing together peer firms to expand alternative product menus or driving investment options such as precious metals and real estate investment trusts (REITs) to advisors through more liquid markets and streamlined technology.

The flurry of activity so far this year includes tie-ups between Wilshire Private Markets and Krusen Capital Management, an alternative products platform; a separate link between Krusen and BNY Mellon’s HedgeMark affiliate; a new platform from Gold Bullion International offering independent advisors a simpler way to buy precious metals and integrate them into portfolios; and an auction platform injecting liquidity into the REIT market through REITbid. The list of moves also includes partnerships between LPL Financial’s Fortigent turnkey platform affiliate and Central Park Group, as well as CAIS tapping into the structured products group at Goldman Sachs.

The effort to build and bolster such platforms stems from the desire to reach a limited but zealous group of independent advisors who use alternatives, says Alois Pirker, research director at Aite Group. A recent survey the firm conducted found that among advisors with $100 million to $1 billion in assets, those at wirehouses had on average 13% of their client portfolios in non-traditional investments such as hedge funds, real estate, currencies, options, futures, and fixed annuities, while independent advisors had 27% in that bucket.

“There is definitely more usage on the independent advisor side,” Pirker says. “It’s not broadly across the independent market, but rather a small group that is heavy on non-traditional products and demanding access to it.”

Providers are nonetheless eager to build systems or forge partnerships that help them reach independent advisors. “Almost anyone who is focusing on the wealth management space has seen growth in the [independent advisor] market and wants to position their proposition to this space,” he says.

Their big areas of focus are making sure their platforms have ease of use and breadth of options, Pirker adds.

Gold Bullion launched its platform in January but is planning to add more functionality throughout the year, says Steven Feldman, the firm’s CEO. The platform will allow advisors to open an account for clients to buy gold and other precious metals, and then be able to report the value of those holdings in their portfolios through standard account management and reporting programs. The platform will add features to allow integration of order entry data into major custodial platforms.

Gold Bullion already essentially incorporates physical minerals into wealth management accounts through a platform it built for Merrill Lynch several years ago, Feldman says. A Merrill advisor is able to use a desktop “ticker” purchase program that specifies the type of metal, choice of bars or coins, quantity of the order, and vault where it will be stored. Gold Bullion then asks 14 dealers to bid on the request, and after fulfilling the order, allows the advisor to track those holdings through standard reporting programs.

Bringing that technology to the independent advisor market has been a bigger challenge, he says.

“There is no mother ship where we can put one very large pipe and everybody gets service,” Feldman says. “The independent advisors use different order entry systems and reporting software. They don’t self-clear. There are lots of vendors, a disparate universe.”

The end result, however, is that independent advisors will be able to integrate a client’s holdings in gold, silver, platinum, and palladium into regular account statements and asset allocation summaries, and even include a wrap fee for the service.

“We make it very simple to buy or sell by pressing that button,” Feldman says.

REITbid is taking a somewhat similar approach to allow advisors to buy and sell shares of pre-existing non-traded public REITs through an online auction platform. The service aims to give the roughly 2 million shareholders who own about $80 billion in REIT shares the option to sell into an open market, similar to electronic bond trading programs that connect buyers and sellers.

Krusen Capital’s recent efforts have focused on expanding options for its client base of high-end advisors, wealthy investors, and family offices. It offers a layer of capital markets analysis and allocation planning, as well as a platform of vetted investment strategies, says Charles Krusen, its CEO.

That platform, LionHedge, now also offers additional strategies through HedgeMark – specifically its managed account product set – and a slate of private equity funds through Wilshire. LionHedge also will use other analytics, tools, and manager research resources from Wilshire and HedgeMark.

“We’re agnostic to where we get the access,” Krusen says. “We’re specialists in forming an investment thesis and then providing options for our clients. We’re not just a supermarket, and we’re not for everybody.”

The partnership between Fortigent and Central Park – both of which conduct due diligence on alternative investment managers, and create platforms of third-party products for their clients to use – is expanding access at each firm to the other’s vetted strategies and research tools. The partnership also entails Fortigent handing over administration and management of a home-grown set of portfolios to Central Park. The set-up gives Fortigent a purely open architecture platform.

And CAIS is bolstering its existing alternative investment platform by adding the Goldman Sachs structured products menu, including the ability to craft customized options. The CAIS platform aims to match the breadth and functionality of wirehouse alternative investing programs.

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