Alternative Investment Compliance and Regulations: A Guide for Financial Advisors
December 5, 2023
Financial Advisors Discussing Compliance for Alternative Investments

When it comes to integrating more alternative investments into client portfolios, one of the largest hurdles financial advisors face are the unknowns around compliance. 

Given the complexity and ever-evolving nature of compliance standards in the financial service industry in general, it’s only natural that financial advisors often find it challenging to keep up with all the intricacies of alternatives while simultaneously running their business and providing top-notch advice to clients. 

Let’s look at an overview of what advisors should know about the alts regulatory landscape and why many advisors choose to turn to experts when it comes to compliance:

 

Regulatory Landscape

The regulatory oversight of alternative investments involves a combination of federal, state, and international entities. Let’s look at the basics. In the US, the Securities and Exchange Commission (SEC) plays a central role in overseeing securities-related aspects of alternative investments, including registration, reporting, and disclosure requirements. On top of this, industry-specific regulators may also be involved; for example, the Commodity Futures Trading Commission (CFTC) oversees commodities and futures markets, while real estate investments are subject to state-specific regulations. Advisors also may be regulated by the Financial Industry Regulatory Authority (FINRA), a private institution authorized by Congress to protect investors to ensure that the broker-dealer industry operates fairly and honestly. 

The interplay of these regulatory bodies creates a multifaceted compliance environment that can be challenging for advisors to navigate alone.

 

Turning to the Experts

Whenever there are a series of complexities, it makes the most sense to get a centralized point of view, but in house compliance teams who have focused on public markets and securities may not feel entirely comfortable providing their opinions. Advisory firms find themselves in a similar seat as their clients – looking for an expert to help them make educated, informed decisions.

 

Trust the Experts

Compliance experts specialize in decoding the complexities of regulatory standards. They stay attuned to the latest updates and changes, relieving advisors from the exhaustive task of constant monitoring. 

  • Minimize Risk: Non-compliance isn’t merely an inconvenience—it often carries substantial financial risk. Compliance experts offer strategies to mitigate these risks, helping advisors steer clear of penalties and legal entanglements.
  • Time Optimization: The endeavor to master alternative investments is time-consuming in itself. Delegating compliance intricacies to experts allows advisors to focus their efforts where they excel: advising clients and fostering growth.
  • Tailored Solutions: Compliance experts can provide customized guidance tailored to an advisor’s business model, client base, and portfolio offerings, ensuring that the compliance strategy aligns seamlessly with the overall advisory approach.
  • Confidence and Trust: Collaborating with compliance experts should foster a sense of confidence, both within the advisor’s firm and among clients. This partnership should signal a commitment to ethical standards and regulatory rigor.

At Mammoth, we understand that integrating alternatives into your clients’ portfolios can come with a lot of growing pains. That’s why we are committed to helping advisors receive best practice compliance accompanied by modern and accountable customer service.

Finding a partner who understands you and your firm and has all the resources to guide you in the right direction when it comes to compliance is critical to integrating alts confidently. Mammoth’s alternative investment platform is a helpful resource for financial advisors seeking to integrate private investments and alternatives into their strategies. With templated client agreements, Form ADV support, and compliance manual guidance, our alts desk can equip you with the certain resources needed to navigate this complex landscape.

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