High net worth investors come with different investing preferences and a broader set of investment options than the average client. For example, high net worth investors are accredited, and therefore have access to alternative investments such as private placements, 1031 exchange DSTs, Qualified Opportunity Zone Funds, and more. Many advisory firms are ill-equipped to handle significant alternative investment business while providing the modern investment experience that clients have come to expect in their financial lives.
The vast majority of alternative investments are still being made through pen-and-paper processes with long, complex subscription documents and lengthy cycle-times involving several mailings and signings. For the investor, that means in-person meetings, flipping through dozens of pages to find the appropriate initial and signature locations, mailing documents, and worst of all, waiting.
Alternative investments can take upwards of 3 weeks on average to process, and that’s if they are submitted correctly the first time, which about half of them aren’t. When there is an error, the whole process often has to start again. Some investments, like 1031 exchanges, fill up quickly, and, in the time it takes an investment to complete, investors can lose out on available equity.
Compare this to the process they experience when investing in a mutual fund. At most, they have a phone call with their advisor, and the advisor can make the transaction in a few clicks on their computer. Frictionless.
And, while advisors may be willing to put in the extra hours to make the occasional alternative investment, doing that much paperwork routinely is hardly scalable. As a result, many high net worth investors are under-allocated to alternative investments, although neither the investor nor the advisor is keen to balance the scales when the process is such a pain.
Luckily, the alternative investment industry has begun adopting technology that allows investments to be processed digitally. Marketplace platforms present registered investment advisors with a showcase of available offerings allowing them to compare investment opportunities and identify the best possible fit for their client. Electronic trade processing facilitates the collection and transfer of investor information in an easy-to-use and error-free format. Subscription packages can be instantaneously sent to clients for electronic signature, before the data is routed back to the advisor and then on to the sponsor. This compresses what was previously a month long process into just a couple of days requiring only minutes of work on the part of the advisor. Investors don’t have to worry about in-person meetings, outdated signing ceremonies, lengthy waits, or missed opportunities.
These technologies finally enable advisors to give their best clients the best possible experience when it comes to alternative investing.
Disclaimer: WealthForge provides this information for educational purposes only. It should not be construed or relied upon as legal or tax advice.