Why HNW clients ‘absolutely need alternatives’

Alternative investments will continue their rise in prominence as high-net-worth clients seek more ways to smooth out volatility.

Andrew Marsh, president and CEO of Richardson GMP, told WP in part one of his interview that the independent is “back in growth mode” and targeting $50 billion AUM. In part two, he addressed the rise of alternatives and what lies ahead amid an uncertain economy.

Marsh said the asset class has been a key part of the firm's strategy to enhance portfolios for about 10 years and has a specialist team focused on research and due diligence. He believes it's a vital component because the efficient frontier of structuring a portfolio simply doesn’t work anymore.

This is particularly true, he said, when wealthy families look to become more goal-based with their investments. Richardson GMP, therefore, makes sure its advisors are sophisticated and prepared to help create non-correlated holdings that make sense for each family.

He told WP: “That's our emphasis … to make sure we're supporting our advisors in using alternatives effectively to smooth out some of the volatility that a straight up efficient frontier portfolio might expose us to, especially as wealth grows.

“For the higher-net-worth client and the ultra-high-net-worth clients, the complexity of that wealth and the things they need to create risk management around, you absolutely need alternatives to help facilitate that.

“We've been comfortable with it for some time. We've put resources into creating a research team that makes sure our advisors are armed with great information and due diligence on solutions that work for [the issues] they're looking to solve. And I think there's more of that to come in the future.”

Now 2020 is upon investors, many outlooks have expressed caution at uncertainty with the economy, global growth and geopolitical risks, the latter exacerbated by America’s recent airstrike on Iran.

Marsh offers a more pragmatic view and prefers to exercise the mind on things he can control rather than the things he can’t. As long as his advisors are armed with the knowledge and resources to grow, he trusts in their process.

“For me, it’s about how do you make sure everyone at the firm lives the brand, is out in the community building their business and growing, and everybody on my management team is aligned with helping our advisors succeed? These are the things that we can control and these are the things that we can put in place that sees us through any volatility.

“Obviously, you've got a lot of people worried about market highs and where we are in the economy. I'm less worried about that because I think if our clients all have really good financial plans and are aligned with their objectives, the day-to-day market volatility matters less and less. If we do our jobs well, not only do our clients have less to worry about, but so do I.”