Alternatives equal key to success for HNW advisers
The majority of advisers focused on high-net-worth (HNW) clients view alternatives as fundamental to meeting client demands, according to Praemium.
The research, released by Praemium and research house CoreData, uncovered that the demand for alternative assets is one of the key differentiators in the HNW space compared to non-HNW advisers.
Nearly 70 per cent of HNW-focused advisers cited the asset class as a necessity for meeting client demands in the future, compared to 34 per cent of non-HNW advisers.
Praemium’s findings also indicate that advisers managing client portfolios above $20 million typically have an average of 14 per cent allocated towards alternatives. Meanwhile, this figure fell to 9 per cent for HNW clients with lower balances.
As wealthy advised clients’ demand for alternatives grows stronger, this will lead to an increased adviser focus on finding investment platforms that can offer efficient and cost-effective access to these assets, the research added.
Speaking at a webinar hosted by the Stockbrokers and Investment Advisers Association last November, Praemium’s head of private wealth, Matt Walsh, remarked: “One of the things that’s happening is that alts are definitely becoming more mainstream. That’s one of the ways the HNW segment is looking to generate some alpha.
“It’s because [investors] are risk-on. It’s also because some understand [alternatives] and they have the cash flows to support it. So, there’s definitely demand for it,” he said.
According to PwC, alternative assets are set to reach US$21.2 trillion ($31.9 trillion) by 2025, when they will account for 15 per cent of total global assets under management.
Beyond alternatives, the research highlighted that HNW-focused advisers are more likely to have strong road-mapped plans for growth than their non-HNW counterparts (27 per cent versus 21 per cent).
The ability to adopt artificial intelligence (AI) will also be essential moving forward, with 39 per cent of advisers with strong growth plans already using these technologies and another 38 per cent expecting to use it in the next 12 months.
Denis Orrock, Praemium’s chief strategy officer, explained: “Today the Australian advice industry is dealing with strong demand, an undersupply of advisers, shifting regulation, and onerous compliance costs.
“As the research showed, all adviser groups see ‘embracing new technologies for greater efficiency’ as the key response to those challenges and the most important strategy to achieve growth over the next five years.”
Praemium previously signalled that it was pivoting the business to offer a “white gloves” service as it targets the HNW market through a three-year strategy. In the HNW segment, there is an investable market of $3.2 trillion, Orrock said, and over 1 million HNW investors.
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Jasmine Siljic
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