HNW clients seeking advice on intricacies of alternatives
With the rise of alternatives, Praemium has found high-net-worth (HNW) investors are turning to financial advisers for help weighing up the various options.
Research by the platform and CoreData of 181 HNW investors found 22 per cent have bit the bullet and are already allocating to the asset, and a further 46 per cent are considering their options and keen to invest in the next 12 months.
Of those who hold them already, 85 per cent said they plan to increase this allocation further.
But with so many options within the alternatives classification, such as private equity, private debt, hedge funds and venture capital, 70 per cent said they have sought financial help to ensure they make the right option for their needs.
As well as understanding the right option, advisers are also popular to help investors navigate risk, understand liquidity, and integrate alternatives within their broader asset allocation. Part of this is due to the lack of education on the topic, with HNW investors saying they “lack familiarity” with the asset class.
Denis Orrock, chief strategy officer at Praemium, said: “While private markets have faced renewed scrutiny and valuation resets in recent months, wealthy investors continue to see alternatives as a strategic component of their portfolios.
“Platforms play a key role in helping advisers access the growing range of alternative assets while providing the administration, reporting, and execution support to implement them effectively.
“There’s a real opportunity for advisers to lead the conversation, particularly now. Clients want to understand how these assets perform in different market cycles, and they’re looking to their advisers to filter opportunities and provide clarity. Advisers who can bridge the access and education gap on alternatives will be well-positioned to add value and differentiate their offer.”
Earlier this month, Mercer discussed why advisers need to consider the risks of alternatives when conducting their asset allocations and switching their clients from traditional assets.
“Portfolio allocations are increasingly leaning on alternative investment strategies to diversify exposure beyond a more typical equity/bond mix. These strategies include private credit, infrastructure and hedge funds, which can help reduce reliance on traditional equity/bond mixes.
“But that brings a new set of challenges for advisers. They may introduce new risks, such as liquidity constraints, complexity or valuation challenges,” Mercer said in its Top Investment Considerations for Financial Advisers 2025 report.
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Laura Dew
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