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Overview of Sales Channels

May 24, 2018

Overview of Sales Channels

May 23, 2018 | Beth Glavosek | Blue Vault

The alternative investment industry has long relied on the Independent Broker Dealer (IBD) channel for its sales; however, a broader array of financial firms are embracing the benefits of income and non-correlation that these products can offer investors seeking diversification into nontraditional asset classes.
 
While alternatives may have gotten their traction through the IBD channel, today, more and more Registered Investment Advisors (RIAs) and wirehouse firms are signing on to offer these products thanks to changes in fee structures that now allow them to participate in alternatives.
 
Here are some important distinctions between each of these sales channels:

IBD firms’ financial advisors operate as independent contractors. The broker dealer supports the advisor's independence but provides back office and transactional services. The advisor has the opportunity to earn commissions on the sale of investment products.
The RIA channel includes independent and mostly fee-only advisors. They are usually not compensated with commissions on the sale of securities, and they are committed to acting with ‘fiduciary responsibility’ for their clients.
Wirehouses are brokerage firms that have branch offices with advisors who are employed and compensated by the wirehouse itself.

 

Because RIAs and wirehouses are relatively new to the alternative investments industry, there’s much that we can explore about the rate at which they’re adopting ‘alts,’ who they are and how they operate, and how they’re compensated for the investments that they recommend. We’ll explore these topics in future blog posts.

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I have been in the financial services industry for 20 years and our firm provides an education platform that gets clients to “think differently” about their financial picture.  For many years we have communicated to clients the need to diversify their portfolios using alternative asset classes and more specifically, private non-traded investments.  Due diligence on these types of financial vehicles is essential and when I learned about Blue Vault in 2010, our firm immediately began using their material as a tool to build confidence in the minds of our advisors on which alternatives to recommend to clients.  I am impressed with the way Blue Vault continues to add value to their subscribers and I view their publication as a tremendous resource in today’s complex world.

John E. Moriarty, ChFC Founder & President, e3 ConsultantsGROUP December 2015 February 3, 2016