What strategies are advisers using to combat inflation and market volatility?

The latest research from Praemium, in conjunction with CoreData, revealed that advisers are primarily utilising “active management and rebalancing”, “active stock selection”, and “partnering with asset managers”, to help them generate alpha.

Furthermore, it found that alternatives continue to be of interest for advisers, with 21 per cent stating they utilise the asset class to generate alpha, and advisers focused on high-net-worth (HNW) clients were the most likely segment of the profession to leverage alternatives.

Research released by Praemium and CoreData in May 2024 highlighted the growing interest of HNW clients on alternative assets, finding that almost one in five (17 per cent) HNW investors were utilising alternative assets. According to Praemium, this was in large part due to their use in diversifying portfolios.

In its latest research, Praemium said advisers indicated that infrastructure, private equity, and private debt were the “assets of choice for advisers seeking benchmark-beating returns and portfolio diversification for their clients”.

Access to a broad range of investment options was also flagged as critical, with 40 per cent of advisers surveyed stating it was an essential factor for generating alpha.

The research further found that platforms and licensees have a critical role to play in advisers successfully generating alpha, with the research finding advisers need “top-tier” support to achieve “superior outcomes”.

To help them succeed, Praemium said platforms need to offer a wide range of investment options for advisers and scenario modelling, benchmarking tools, and detailed performance analysis tools, while licensees can provide their advisers with essential research and education, to help them make informed decisions.

Praemium added that when advisers have the necessary tools and support from platforms and licensees, they are “more empowered to navigate the challenges of inflation and market volatility effectively and deliver superior outcomes for their clients”.

Speaking on the research findings, Praemium chief strategy officer Denis Orrock further highlighted the essential role of platform providers and licensees in supporting their advisers to achieve greater results for their clients.

“With the complexities of today’s financial markets, there’s a tremendous opportunity for platforms, asset consultants, and licensees to work together to provide the crucial support advisers need to generate alpha,” he said.

“Our research demonstrates that in a landscape where informed, agile decision-making is key to success, choosing the right partners is more vital than ever.”