Financial planners embrace alternative investments in uncertain market

Financial planners are significantly increasing their use of alternative investments, marking a sizable shift in investment strategy amid ongoing market volatility and economic uncertainty, according to the 2025 Trends in Investing Survey. The study was conducted by the Journal of Financial Planning and the Financial Planning Association.

“The collaboration between the Journal of Financial Planning and FPA continues to yield invaluable insights into the evolving investment landscape,” said 2025 FPA President Paul Brahim. “The 2025 Trends in Investing Survey provides a crucial snapshot of how financial planners are navigating today’s market and economy. These insights offer valuable guidance as we navigate an evolving investment landscape for our clients.”
Increase in the use of alternative asset classes

Alternative investments

The survey uncovers a substantial increase in the adoption of various alternative investments and asset classes.

They include:

• Options: Usage nearly doubled from 8.65% in 2024 to 17.16% in 2025, a remarkable 98.38% increase.

• Individually Traded REITs: Rose from 14.9% to 23.13% (+55.23%).

• Private Debt: Increased from 12.5% to 19.4% (+55.2%).

• Non-Traded REITs: Climbed from 9.62% to 14.18% (+47.4%).

• Precious Metals: Grew from 8.65% to 12.69% (+46.7%).

Why the increase in the use of alternatives?

In explaining the growth in the use of alternative investments, Brahim said that in the early days of Modern Portfolio Theory (MPT), most of the research around portfolio construction focused on just four main asset classes: Cash, Bonds, Stocks, and Real Estate—primarily within the U.S.

Strategies, research ‘evolved’

“As investment strategies evolved, so did the research. Investors began looking more closely at things like company size—large-cap, mid-cap, and small-cap stocks—as well as different types of bonds based on quality and duration, from high to low quality and short- to long-term maturities, “Brahim said.

“Eventually, these categories expanded to include international markets, adding even more depth to the idea of asset class diversification—a long-standing cornerstone of building a well-balanced portfolio. Now, alternative investments are becoming the next natural step in this evolution. Financial planners are increasingly turning to these non-traditional assets to help manage risk and volatility, while still aiming for strong returns and maintaining liquidity. Especially in times of economic uncertainty, alternatives can offer a valuable layer of diversification beyond the classic 60/40 stock-bond mix, helping to smooth out returns and strengthen overall portfolio resilience.”

And why has the use of options doubled in one year? “Options usage nearly doubled as planners increasingly use them for hedging and income strategies,” Brahim said. “Tools like covered calls and protective puts provide a form of portfolio insurance, appealing in today’s volatile markets.”

Sophistication increases

But beyond traditional uses, Brahim added, advisors are now leveraging options in more sophisticated ways:

• Synthetic exchange funds are gaining traction as a tax-efficient solution for clients with concentrated stock positions. By using options to replicate diversified exposure, planners can help clients defer capital gains taxes while maintaining market participation.
• Leveraged long/short options strategies are also being employed to intentionally generate capital losses. These losses can offset gains from low-basis, highly appreciated positions in stocks, ETFs, or mutual funds—providing a powerful tool for tax alpha.

“This evolution reflects a broader trend: Options are no longer just for speculation or basic hedging—they’re becoming integral to advanced portfolio construction and tax management,” Brahim said.

Crypto, ESG funds marginal

At the same time, the survey said that the use of previously hyped tools like ESG funds and crypto currency appears to be flat or marginal, as opposed to the use of other alternative investments. And why is that the case? “Interest in ESG funds and crypto has plateaued due to performance concerns, regulatory ambiguity, and shifting client priorities,” Brahim explained. “Only 8% of planners expect to increase ESG allocations, and crypto remains marginal at 5% usage.”

Also, interest in cryptocurrency has plateaued not only due to volatility and regulatory uncertainty, but also because of estate-planning complexities, Brahim explained. Unlike traditional assets, crypto holdings are often stored in private wallets with keys that, if lost or undisclosed, can render the assets permanently inaccessible.

“This creates significant challenges for heirs and fiduciaries, especially when crypto is not properly documented in estate plans. From an investment perspective, crypto remains highly speculative, with price swings that can undermine portfolio stability. But from an estate planning standpoint, the lack of standardized custodianship, legal clarity, and beneficiary protocols adds another layer of risk,” he said.

Brahim pointed out that crypto ETFs offer a potential solution. “By wrapping digital assets in a regulated, exchange-traded structure, they provide easier access, clearer tax reporting, and more straightforward integration into estate plans. Custodianship is handled by institutions, and shares can be transferred or inherited like any other security—reducing both investment and estate-related friction,” he said.

And what is the most important takeaway for planners from this survey? The key insight, Brahim said, “is that diversification is evolving. Planners are embracing a broader toolkit—including alternatives and options—to build more resilient portfolios without sacrificing liquidity or return.”

The 2025 Trends in Investing Survey provides crucial insights into the evolving landscape of investment management. For the complete report, please visit the 2025 Trends in Investing Survey. The 2025 Trends in Investing Survey was conducted from March 23 to May 4, 2025, and received 195 responses. The study, conducted annually for over a decade, highlights a growing appetite for diversification  into alternative investments beyond traditional stocks and bonds, with planners seeking new ways for growth and risk management.

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