Hybrid Wholesaler Model Now Majority Practice in Alts Distribution: Cerulli
More than half of asset managers offering alternative investments rely on a hybrid distribution model pairing generalist wholesalers with product specialists, according to new research from Cerulli Associates. The absence of a clear industry best practice is complicating distribution as adviser demand for alternatives climbs.
Among firms offering alternatives, Cerulli found that 54% use the generalist-plus-specialist hybrid approach. Another 26% rely solely on generalist wholesalers, while 15% use only alternatives-specific wholesalers. Six percent deploy an alternatives-specific wholesaler sharing territory with a generalist.
“One of the largest hurdles for managers is how to build or blend distribution teams to provide advisers the best client service,” said Andrew Blake, associate director at Cerulli. “Although resources vary significantly among firms, the mix of approaches shows a lack of a clear industry best practice.”
The distribution fragmentation comes as adviser allocations to illiquid alternatives are rising. Advisers managing at least $500 million in assets under management currently allocate 4.4% of client portfolios to illiquid alternatives, a figure Cerulli projects will grow to 5.7% by 2027.
Education is the primary constraint on that growth. Three-quarters of asset managers identified adviser education as the leading obstacle to distributing alternatives, a finding Cerulli says should drive investment in specialist hiring and sales support.
The research also highlights differences in how advisers approach portfolio construction. Fifty-eight percent of advisers report that their own practice is the primary influence on portfolio creation; 30% rely primarily on their broker-dealer or custodian, and 12% use a third-party service. Advisers in the independent and hybrid registered investment adviser channels are more likely to construct portfolios in-house (82% and 66%, respectively), compared with retail bank advisers (49%) and insurance broker-dealer advisers (39%).
Advisers managing high-net-worth clients show stronger demand for alternatives. Among advisers whose core market is clients with $5 million or more in assets, 63% report currently investing in alternatives, and advisers overall expect their alternatives allocation to increase by nearly one percentage point over the next two years.
Cerulli recommends that asset managers equip distribution teams with firm-level data on adviser portfolio construction processes to sharpen product-specific and channel-specific coverage strategies. The firm also recommends expanding specialist resources dedicated to alternatives distribution for high-net-worth-focused practices, citing evidence that wholesalers who collaborate with product specialists are more likely to be seen as providing superior client service.
“Wholesalers who collaborate with product specialists are more likely to be perceived as providing superior client service to advisers,” Blake said. This approach can foster long-term trust and loyalty among advisers, “ultimately contributing to a more resilient and collaborative investment environment.”
Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business.
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