HNW clients demanding more access to Alternative Assets
HNW clients demanding more access to Alternative Assets
High New Worth (HNW) investors increasingly seek the diversification and return advantages of Alternative Assets. Yet one-third of advisers find it difficult to give them access to those assets according to Q3 2024 data from platform provider Praemium and independent research house CoreData.
According to the research there’s a strong correlation between levels of wealth and allocations to the Alternative Assets asset class. At HNW-focused adviser firms, an average of 9% of portfolios are invested in Alternatives. That’s more than double the allocation at adviser groups focused on less wealthy clients.
The wealthier the client, the higher the allocation to Alternative Assets. Advisers managing client portfolios north of $20 million typically have an average 14% of portfolios in Alternatives.
HNW Advisers see Alternative Assets as the investment of the future
Whilst the existing HNW preference for Alternative Assets is striking, the Praemium/Core Data research suggest this trend will only strengthen:
- 69% of HNW-focused advisers see Alternatives as key in meeting client demands in the future.
- Advisers with a focus on HNW clients are twice as likely to see Alternative Assets as a vital part of meeting clients’ future demands as non-HNW advisers.
Access is the issue
Whilst client and adviser demand for Alternative Assets is strong, giving clients access to those assets is seen as more of a challenge. Over 30% of HNW-focused advisers found accessing Alternatives via their primary investment platform difficult. Nearly 10% described it as impossible.
As advisers focused on wealthier clients continue to seek asset allocation choices that meet the unique needs of HNW clients, it is likely issues of platform access will become more important. The Praemium/CoreData research highlights the importance of improving access to Alternatives via platforms.
In 2024, HNW-focused advisers are showing a clear preference for platforms that offer a wider range of investment options – especially those that allow access to non-custodial assets. With 28% of HNW-focused advisers already using non-custodial assets (versus just 11% for advisers focused further down the wealth spectrum) it’s likely platforms that are more flexible around asset choice – whilst providing exceptional administrative capability – will continue to grow their share of the HNW advice market.
Praemium’s Chief Strategy Officer Denis Orrock commented “The research aligns with what we are seeing on our platform, with alternative assets growing by around 20% per annum to total around $6bn in funds under administration. This increasing demand reflects the critical role these investments play in the portfolios of high-net-worth clients. Our new Spectrum product was designed to address these very needs, offering streamlined access to the broadest range of alternatives and non-custodial assets and alleviating some of the challenges that advisers have implementing and administering these assets. Spectrum represents our commitment to enhancing platform flexibility and ensuring advisers have unrivalled access and the tools to support clients in capturing new investment opportunities.”