Alternative investments pose an opportunity for advisers

Research conducted by Praemium and CoreData has highlighted the importance of advisers consistently monitoring investment trends to help maintain their relationships with clients.

The research found that almost one in five (17 per cent) high-net-worth (HNW) investors are now utilising alternative assets. Praemium said this, at least in part, is a strategy to diversify their portfolios.

Engagement with alternative assets has also been linked to higher engagement with advisers, with the report revealing that 56 per cent of HNW investors engaging with the asset class have an ongoing relationship with an adviser, compared with just 36 per cent of those not utilising alternative assets.

Despite this, the research also noted a potential missing link in adviser-client communication, which saw 64 per cent of HNW investors seek out their own methods for investing in alternatives, indicating the need for enhanced collaboration between both parties.

Along with it impacting the professional relationship, Praemium said clients independently investing in alternative assets could lead to a disjointed portfolio and expose them to excessive risk.

Praemium chief strategy officer Denis Orrock noted that for advisers looking to utilise alternative assets for their clients, platform choice is important to ensure ease of trading.

“Advisers often cite liquidity and transparency as hurdles for investing in alternative assets,” Orrock said.

“A key contributor to successfully implementing alternatives into portfolios and overcoming these hurdles is leveraging a platform partner equipped with the capabilities to facilitate seamless trade execution and deliver transparent reporting on complex assets.”

Alternatives are now approaching $6 billion in funds under management (FUM) on Praemium’s platform, a 23 per cent increase in funds allocated over the last year. Alternatives now account for 11 per cent of the platform’s total FUM.

Engaging with HNW clients about alternative assets can, according to Orrock, strengthen the relationship and trust between advisers and their clients as it increases collaboration between both parties.

“There is a significant opportunity for advisers to have the collaborative advice relationship HNWs are wanting, which can strengthen client relationships, mitigate the risk of clients seeking opportunities independently, and help the adviser position themselves as a trusted partner to guide them through the complexities of this asset class,” he said.