/>iA 2025 survey by the Journal of Financial Planning and the Financial Planning Association, conducted from March 23rd through May 4th, found that financial planners are shifting their investment strategies towards growing alternative investment classes. Why?
The More Immediate Reason
The shift to alternative investments arguably points to investor concerns over the economy. According to the survey, financial planners who are re-evaluating their clients’ allocation strategies are most conscious of anticipated changes in the economy (69%) and market volatility (63%).
Amidst recent economic turmoil, stocks and bonds have both experienced volatility. The first half of 2025 was marked by uncertainty around tariffs, causing the S&P 500 to fall by 10% in the two days after sweeping tariffs were announced. Bonds, historically considered the safer investment, are also seeing rising yields, and concerns have been raised over US debt. These emerging tensions indicate that investors may be losing confidence in the US bond market.
The current uncertainty around traditional assets has thus encouraged investors to explore diversification into alternative investments that can offset their risks. For one, the price of precious metals has historically increased when the stock market is in crisis, with investors seeing greater appeal in tangible assets.
The Longer Term Reason
The increased use of alternative assets was made possible, indeed, inevitable when the JOBS Act took them out of the shadows.
Financial Poise Founder, Jonathan Friedland, was one of the first commentators on record to anticipate the trend toward alternative assets, starting in 2012. To wit, in his 2014 book, The Investor’s Guide to Alternative Assets, he wrote:
“Until recently … federal securities laws prohibited advertising of accredited investment opportunities. Most accredited investors were consequently completely in the dark about them. This changed as a result of the Jumpstart Our Business Startups Act (or ‘JOBS Act’ for short) [signed into law on April 5, 2012].
Under the JOBS Act, entrepreneurs, companies, private equity and venture capital funds, hedge funds, and others are now able to advertise investment opportunities and solicit investments from accredited investors. The JOBS Act is also the law that legalizes equity crowdfunding …
Because of the JOBS Act, accredited investors are going to learn more and more about the existence of the world of alternative assets. No longer will this world be confined to those who, for example, read The Wall Street Journal cover to cover each day. Rather, you are going to hear about it on television shows like Today and Good Morning America.”
Traditional Investments Are Not Going Anywhere
While Friedland predicted in 2012 that the rise of alternative assets was “an inevitability the moment the JOBS Act became law,” he also predicted that most accredited investors would continue to invest most of their investible wealth in the public markets. These predictions, thus far, appear to be right, with the second of them aligning with the survey’s finding that two-thirds of financial planners are still confident in the traditional 60/40 portfolio’s ability to provide the same returns that it has historically.
Diversification & Asset Allocation
The concept of diversification is easily understood: spreading your investments across different assets that are expected to perform in ways that are not correlated should reduce your total risk. In the context of the stock market, for example, if you could invest all your money into only two stocks, you would likely not want to put it all into Coke and Pepsi, or Burger King and McDonald’s, or Meta and Google. Instead, investing in different sectors of the stock market (i.e., different industries) is an example of diversification. But all of this speaks to diversification within an asset class.
The problem is that all publicly traded stocks have some level of correlation with each other. In other words, there are periods when most stocks perform poorly. To protect against this, an investor must also look to diversify among asset classes, and this is generally referred to as asset allocation.
The stock of publicly traded companies is just one asset class. Others include real estate and privately held shares of companies. [Editors’ Note: Read more about this in Investing Basics for Beginners, Installment #3: Never Put All Your Eggs in One Basket.] Assuming you want to invest in such other asset classes in a passive manner (i.e., just as you do when you buy shares of a publicly traded company, as opposed to being part of the management team), each is considered an alternative asset. Thus, vehicles like hedge, private equity, and venture capital funds are additional examples of alternative asset classes, as are things like precious metals and cryptocurrency.
Buyer Beware!
Only 5% of surveyed planners use/recommend cryptocurrency, with 3% expecting an increase in the next 12 months, and 4% expecting a decline. Financial Poise, for what it’s worth, agrees with those experts who view crypto as purely speculative.
Whether right or wrong, there are at least two broader points to be made: First, most people do not understand the world of alternative assets to the same extent they understand traditional investment classes (and the extent to which most people understand even traditional investment classes is, itself, questionable). Second, many, if not most, of the guardrails (e.g., mandatory disclosures, registration requirements, governance standards, and oversight by regulatory bodies like the SEC) that protect investors when investing in publicly traded securities are relaxed, if not absent, when they invest in many alternative asset classes. [Editors’ Note: Read more about this in More Venting About the ‘Democratizing’ of Investing.]
[Editors’ Note: To learn more about this and related topics, you may want to check out the Financial Poise YouTube Channel! This article was originally published on June 10, 2025.]
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