News

This year’s Schwab IMPACT conference brought together hundreds of wealth management professionals at the Moscone Center in San Francisco. Held shortly after the presidential elections, the event was abuzz with speculation about the potential market impacts of the political shift. Despite this backdrop, the agenda remained firmly focused on advisor-centric experiences, highlighting the latest trends and innovations in the wealth management industry.

Personalization and Portfolio Diversification Take Center Stage

A recurring theme throughout the conference was the growing importance of creating personalized, goals-based investment solutions for clients. Advisors are moving away from generic investment strategies to focus on tailored portfolios that align with clients' unique objectives, life stages, and risk tolerances.

Portfolio diversification was another hot topic, with discussions emphasizing the need to incorporate a variety of asset classes and strategies. From traditional investments to emerging alternatives, the focus was on building resilient portfolios to weather market volatility and capitalize on growth opportunities.

Technology and Investment Products Dominate the Exhibit Floor

The exhibitor breakdown at Schwab IMPACT 2024 reflected the industry’s priorities. Over 60% of exhibitors were technology and investment product providers, showcasing the tools and solutions driving the future of wealth management.
Here’s the full breakdown:

• Technology Providers: 188

• Mutual Funds: 94

• Alternative Investments: 60

• ETFs: 61

• Managed Accounts: 70

• Schwab Advisor Services Providers: 40

• RIAs: 26

• Retirement Services: 14

• Bank/Trust: 14

Technology providers stole the spotlight, offering insights into how digital tools are transforming client interactions, streamlining operations, and enhancing decision-making. The strong presence of investment product providers further underscored the industry’s reliance on innovation to meet evolving client demands.

Challenges in Alternative Investment Distribution

The alternative investments segment, represented by 60 exhibitors, was a major focus of discussions at Schwab IMPACT. Independent providers and rapidly growing marketplaces like Schwab’s One Source, iCapital, and CAIS highlighted the industry's evolution. However, distribution remains a persistent challenge for alternative investments.

For many funds, gaining visibility on custodial platforms and marketplaces comes at a steep cost, with significant listing fees. This has led to a paradox: while marketplaces have expanded access to alternative investments, they’ve also increased distribution costs. Funds now face the dual burden of paying fees to custodians and industry aggregators, adding pressure to their bottom lines.

The Role of Alternative Investment Custodians

Alternative investment custodians were absent from the conference. These custodians offer a streamlined distribution channel for private investment vehicles but still lack the scale and reach of traditional investment platforms. As the alternative investment space continues to grow, the role of custodians may expand, potentially reshaping the distribution landscape and addressing current inefficiencies.

Looking Ahead

Schwab IMPACT 2024 reinforced the wealth management industry’s commitment to innovation, personalization, and diversification. While technology and investment products continue to drive progress, challenges such as efficient distribution in the alternative investment market remain to be addressed.

As the industry evolves, advisors will need to navigate these complexities to deliver value to their clients. Schwab IMPACT 2024 offered a glimpse into the future, emphasizing the importance of adaptability and forward-thinking in shaping the next chapter of wealth manag

The recent acquisition of Alts Exchange (www.altexchange.com) by iCapital (icapital.com) marks another wave of consolidation in the alternative investment industry. Just a few months earlier, SEC (www.seic.com) acquired Altigo (www.altigo.com), a cloud platform for alternative investment inventory, e-subscriptions, and reporting.

Both Alts Exchange and Altigo were once agile, efficient companies connecting mid-sized fund managers and asset allocators. Now, they're part of large, multi-billion-dollar operations, which could shift the industry landscape.

Large firms tend to focus on institutional clients, pursuing big funds and high-value opportunities. As a result, smaller and mid-sized investment managers may find themselves underserved. Many small and mid-sized sponsors avoid large providers for several reasons:

1. Smaller firms prefer working with similar-sized service providers.

2. Smaller funds are more cost-conscious and unwilling to overpay for distribution.

3. Large asset allocators often overlook smaller investments due to the extensive due diligence, legal work, and documentation required.

In this changing environment, alternative investment custodians are stepping up. Their role is expanding to include asset performance reporting, tax document automation, and deeper integration with traditional asset management systems—all while maintaining a retail-oriented service model.

Alternative asset custodians play a key role in protecting investments from potential losses. They assist investment managers by handling subscription and core offering documents. By servicing individual investors and financial advisors, alternative investment custodians help small and mid-sized sponsors reach a wider investor audience.

The recent ADISA annual conference highlighted a significant shift in the alternative investment custody space. Over the years, the number of custodians participating in the industry has grown, with many becoming major sponsors of the event. These custodians are now playing a pivotal role in driving the development of the entire alternative investment sector.

Traditionally, alternative investment custodians primarily served individual investors, managing self-directed and other tax-advantaged plans. However, their role has evolved into more powerful entities that facilitate investment allocation and distribution on a larger scale.

At the ADISA conference, custodians showcased a broader focus beyond just recordkeeping for self-directed IRAs. They are positioning themselves as integrated players in the investment ecosystem, contributing to the manufacturing and distribution of alternative investments. Their services now include asset aggregation, portfolio reporting, and the promotion of alternative investment marketplaces.

A key indicator of the industry's maturity is the consolidation trend, exemplified by companies like Millennium Trust, now part of Inspire. Inspire has acquired several independent custodians, consolidating accounts and practices to become a major force in the space.

The presence of a full range of infrastructure players at ADISA—such as custodians, transfer agents, and trust companies—demonstrates a solid foundation for the industry's sustainable growth.

Another trend observed at this year’s conference is that large investment sponsors are increasingly listing their private investments on various custodial marketplaces. In the future, the distribution of these alternative investments is expected to become even more streamlined and efficient. Companies are actively working on aggregating alternative investment opportunities, including illiquid private funds. Expanding these marketplaces to accommodate smaller investment opportunities and penetrate deeper into the private market over the next 3 to 5 years could transform the industry further.

About ADISA (www.adisa.org)

The Alternative & Direct Investment Securities Association (ADISA) is the largest forum for professionals involved in the alternative and direct investment industry. Initially, it served as a hub where sponsors of private real estate investment vehicles could connect with broker-dealers and other institutional distributors of investment products.

Over the years, the range of investment products represented through ADISA has broadened significantly. Today, it includes sectors such as infrastructure, energy, and commodities, as well as more complex pooled investment vehicles like structured investment products and hedge funds.

One of the key attractions for sponsors and managers of non-publicly traded and illiquid investment opportunities is ADISA's focus on providing access to specialized distribution channels, which cater specifically to private placements and alternative investment products.

Alternative Investment Custodians at ADISA

Historically, alternative asset custodians within ADISA have played a pivotal role in servicing individual investors seeking exposure to private and illiquid alternatives, particularly in real estate. Sponsors of multi-tenant residential and commercial properties often looked to raise capital from high-net-worth investors, many of whom accessed these opportunities through alternative asset and self-directed custodians, allowing them to allocate portions of their portfolios to alternative investments.

After the 2008 recession, interest in real estate as an investment class surged. With expectations of significant appreciation in property values, thousands of individual investors began allocating their tax-advantaged investments, such as IRAs, into real estate. During this period, many investment sponsors shifted their focus toward the individual investor market.

The investment landscape has since experienced several waves of transformation throughout the 2010s and 2020s, further elevating the role of alternative asset custodians. These custodians have facilitated private capital inflows from individual (non-institutional) investors into various asset classes, including:

• Residential real estate and syndicates (2009-2014)

• Precious metals (2011-2016)

• Crowdfunding platforms (2012-2018)

• Crypto assets (2016-2022)

Registered Investment Advisors at ADISA

Since the mid-2010s, the alternative investment distribution model has gradually shifted from commission-based broker-dealer frameworks to fiduciary models. With growing interest in alternatives from individual investors and their financial advisors, sponsors of non-publicly traded investment opportunities have increasingly focused on working with private capital.

In response to the financial recession and heightened market uncertainty, registered investment advisors (RIAs) have placed greater emphasis on portfolio diversification. Alternative investments have become an essential component of managed portfolios, offering investors exposure to non-traditional asset classes that can hedge against volatility in public markets.

This year, the ADISA conference is expected to see a record number of participants from the financial advisor space, reflecting the increasing role of RIAs in the distribution of alternative investments.

Alternative Investment Custodian Inc (Alts Custodian)

Alternative Investment Custodian Inc (Alts Custodian) plays a pivotal role in assisting financial advisors in smoothly integrating private asset investment strategies into their clients' portfolios. As the demand for portfolio diversification grows, particularly among high-net-worth individuals, advisors are increasingly turning to alternative investments to provide exposure to non-publicly traded assets like real estate, private equity, and other illiquid investments.

Alts Custodian has fully integrated its processes into leading multi-custodial platforms, enabling financial advisors and Registered Investment Advisors (RIAs) to efficiently place client funds into alternative assets. This streamlined integration simplifies the administrative and compliance hurdles traditionally associated with alternative investments, allowing advisors to focus more on strategy and client outcomes.

By leveraging Alts Custodian's platform, advisors can offer their clients broader investment opportunities beyond public markets, enhancing portfolio resilience through diversification. This approach not only helps mitigate market volatility but also allows clients to access sectors that have historically been reserved for institutional investors.

Moreover, with increasing uncertainty in public markets and growing regulatory scrutiny on fiduciary standards, the ability to integrate alternative investments in a compliant and seamless manner is critical. Alts Custodian helps bridge this gap, ensuring that advisors can deliver sophisticated, diversified investment strategies while meeting regulatory obligations.