I’ve been thinking about alternative investments and client perceptions of risk this week. It has been on my mind since the webinar I moderated last month, The case for alternative investments in 2025. Risk came up in two contexts: the use of alts for diversification purposes during periods of volatility, such as the one we’re in currently and the unique risks associated with some alts.

Mustafa Bukhari, national team lead at Skyline, put it well on a question about fund gating provisions that prevent clients from accessing their investment during certain periods. He described this liquidity risk as “not only just a technical, but also an emotional issue … when you have a client looking to get access to their funds.”

What’s important, Bukhari said, is that advisors communicate and educate clients on how gating works. Not easy, by any means. But he’s right about the importance of proactive communication — there is nothing closer to a silver bullet when it comes to building client relationships.

There is a third aspect of risk in all of this, not solely related to alts. Your clients don’t understand how it works.

Our inability to clearly articulate the nature of risk-return tradeoffs is at the heart of Canadians’ struggle with financial literacy.

Continue reading here.

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