Q&A: RIA Introduces New Guide with Tools for RIAs to Modernize Portfolios and Practices

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Editor’s note: At Gregory FCA, we are always excited about collaborating with clients on new projects. When Bill Militello, founder and CEO of Militello Capital, came to us with the idea of creating a resource for the registered investment advisor (RIA) community, we were all ears. Generating insightful and useful content for financial services firms, particularly RIAs, is something we at Gregory FCA are committed to and produce every day. We visited with Bill to explore his thinking behind Militello Capital’s latest project, the Real Alternatives Report (RealReport™), and how it can be a resource to advisors as it addresses and offers solutions to the pains and anxieties facing their community.

Joe Anthony: What is the objective of the RealReport™?

Bill: The RealReport™ is intended to serve as a guide for RIAs who want to grow, compete and succeed in the industry by making informed decisions. Our objective is for RIAs to read this to learn more about how to modernize their portfolio and their investment practice by using alternative investments. We wanted to create something of value in the marketplace that educates and addresses common anxieties of the RIA. Given our own experience as an RIA, and having conversations with so many other RIAs in recent years, we have become acutely aware of advisors’ struggles. Because of this, we wanted to produce an actionable toolkit that comes from real world experience and is relevant to solving the pain and problems that RIAs are experiencing, as well as help them look over the horizon of what may be coming and how to position themselves accordingly.

Looking back 15 years ago companies said, “I need a website or I’m not competitive. I don’t know how to do that. How do I get educated? Where’s the guidebook that teaches me how to go out and secure and build a website?” Five years ago it became, “I need a Facebook page. How do I do that?” There’s always these new things that businesses need to stay competitive and relevant, and the RealReport™ is meant to be that guidebook to alternative investments as human advisors strive to stay relevant in the marketplace.

We lead off from a very macro-economic perspective and talk about regulation, technology in terms of robo-advisors, the importance of due diligence and products in terms of private real estate. There’s really something in it for everybody.

Joe: What are some of the trends and issues impacting the plight of the RIA?

Bill: There are competitive forces at work with the advent of the robo-advisor; whether you believe, as a RIA, that’s a threat or not, it certainly can’t be dismissed out of hand. What we’ve seen over the last 20 years is a very apparent and sustained compression of fees, which has a real impact on revenue to advisors. This has been a catalyst to other competitive forces like many new entrants to the marketplace and brokerage houses moving more toward the fee-only model, all while fees are coming down in concert with the decline in bond yields.

In addition, regulations have shifted a little bit in terms of providing an opportunity for investors of lesser means to have access to a different array of products that they might have kept at arm’s length in the past. There’s been an increase in buzz about how different sources of capital are providing funding for growing businesses, more or less serving as non-traditional avenues of venture capital for these businesses. An increase in both innovation and regulation has also served to make running a business more costly, thus presenting challenges and opportunities for RIAs.

There’s always been a lot of different asset classes, such as private equity, private real estate and venture capital, but for a very long time, the traditionally trained advisor has constrained the asset allocation conversation or debate between two asset classes – publicly traded stocks and publicly traded bonds. And, while those two asset classes are certainly important and provide inexpensive massive diversification as well as liquidity, the goal of Militello Capital and the RealReport™ is to not only demonstrate that the ability to invest in private equity, venture capital and private real estate has been democratized, but show the meaningful impact that private equity, venture capital and private real estate provide the modern portfolio.

Joe: For an RIA reading this, what takeaways are embedded in the RealReport™ as it relates to their boomer client? Mid-career client? Millennial client? 

Bill: I think the common theme, whether we’re talking boomer, mid-career or millennial, is being able to relate to your investment and really know your investment. At the boomer and mid-career level, these individuals can relate to investing in entrepreneurs and real estate and can appreciate the importance of adding them to a stock and bond portfolio because that’s how they made their money to begin with. That’s how they became high net worth.

On the other hand, millennials have just as strong a desire to add entrepreneurs and real estate to their stock and bond portfolio because they can relate to the technology the entrepreneurs are developing – it is what they’ve grown up using and are most familiar. Millennials can relate to innovators in the marketplace, the Elon Musks and the Mark Zuckerbergs are their heroes just like previous generations idolized action heroes or sports figures.

What it really boils down to is offering clients investments they can relate to, and understanding why they relate to it.

Joe: What is the one takeaway from the RealReport™ you think will have the most impact on how RIAs pursue their marketing and growth in 2016?

Bill: The main takeaway of the RealReport™ that advisors can utilize is for them to take a hard look at their relevance in the current marketplace, and be willing to shift their philosophy to an “adapt or die” mentality. In this hyper-competitive environment, advisors need to have a differentiator to compete, to both attract and retain their most coveted clients. The best way to do this, in my opinion, is by articulating a philosophy of wealth creation and implementing it through well-vetted private investment deals. In nature, human advisors are either growing or dying. The RealReport™ strives to empower advisors to become a wealth creator and start growing so they can continue to be an asset to their clients. The report is chock full of ideas on how to be a wealth creating advisor, because in essence, it is their only shot at differentiating themselves from the other competitive forces.

To read the full RealReport™, click here to download.