Wealth Managers Look to Alternatives

Terry Flanagan

Registered investment advisors, like many of their wealthy clients, are looking ahead to retirement, which for many isn’t that far off. The bulk of RIAs are between 55 and 62, and after spending a lifetime building a business, they are looking for avenues to maximize profits. Alternative investments are a logical choice, according to Keith Gregg, president of Aequitas Capital Partners.

“Alternative investments, which represent less than 5% of the RIAs client asset allocation model today, will be 15% by the end of 2020,” Gregg told Markets Media. “Today, alternative investments within all of the retail distribution channels represents $508 billion, growing to $2.54 trillion by 2020.”

Alternative investments are no longer reserved solely for institutions, pensions, and foundations. “The high net worth market place is demand it now from their advisers,” Gregg said. “It’s the fastest growing asset class. Advisers need access to institutional quality product targeted at the retail channel.”

Gregg joined the firm at the beginning of the year to formulate a plan to Aequitas Capital Management to distribute its private credit and private equity strategies and products to the RIA marketplace.

“In the first quarter, I came on as a consultant to help develop a business plan, develop the strategy, do the research and an assessment on what is the best way for Aequitas to leverage its specialty finance, asset management and wealth manager capabilities, and who would be the best audience to distribute their products to,” he said.

Gregg created ACP as a means to distribute Aequitas Capital Management’s private equity and private credit funds to the RIA market in the form of a membership network of RIAs, who could borrow money from or sell equity stakes to Aequitas Capital Management in exchange for distributing its products.

“Many of these advisors are beginning to think about their retirement,” Gregg said. “They have spent decades painstakingly growing successful businesses one client at a time. Now, in the later years of their careers, they need to accelerate growth to meet their retirement objectives and improve their business valuations. The best way to accelerate that time is through acquisition and that generally requires an infusion of capital.”

ACP, with support from its parent company, Aequitas Capital Management, provides RIAs with equity, cash flow lending, and asset-based lending, to fund merger and acquisitions, lift-outs, and expedited recruiting of advisors. “We are broadening the scope of Aequitas’ services to address the challenges of mid-sized RIAs. This is the fastest-growing segment of advisors, expanding at a rate of 20 to 30 percent each year,” said Bob Jesenik, CEO and co-founder of Aequitas. “Unfortunately, these firms are often too large to qualify for government-backed small business loans, yet too small to attract private equity firms.”

Based in Portland, Oregon, ACP aspires to be “the alternative growth partner to the growth- oriented RIA that does alternative investments,” said Gregg. “We’re willing to put our money where our mouth is by investing in them either in the form of equity investment if they’d like us to. “

ACP provides capital to RIAs in the form of debt, equity and asset-based lending. Qualification and eligibility is based on asset commitment to allocate to Aequitas Capital Management alternative investments. Asset-based loan eligibility is calculated at 4% of assets placed with Aequitas Capital.

“We’re not an RIA aggregator like a HighTower or United Capital,” Gregg said. “We’re willing to take a minority or majority interest, whichever they wish, if they need equity or want equity. We’re willing to make a debt investment to them and we’re willing to provide them with lines of credits and give them access to loans to help fuel their growth.”

Related articles

  1. Investors are seeking the tax efficiency, trading flexibility and cost benefits of ETFs.

  2. Low Bond Yields Force Pensions’ Hand

    US Department of Labor has allowed pension plan fiduciaries to consider ESG factors.

  3. Goldman Sachs Asset Management agreed to pay a $4m penalty.

  4. FINRA membership marks further momentum in WisdomTree Securities' digital strategy.

  5. The prior administration’s restrictions on retirement plans and ESG were removed.