Advisers key as high-net-worth investors surge into private markets

A recent report by Praemium, in collaboration with Investment Trends, revealed that 146,000 high-net-worth (HNW) individuals are currently investing in private markets, with 32 per cent planning to increase their investments in the next year. Additionally, another 32,000 investors are expected to enter the market within the next 12 months.

The report underscored the expanding opportunity for advisers, noting that investors are increasingly seeking information on private markets through newsletters, financial websites, and webinars.

“This indicates an opportunity for advisers to provide essential education on the risks and rewards of private market investments, helping clients understand the due diligence process and set realistic expectations,” Praemium said.

It also highlighted that those who are already investing in private markets rely the most on their adviser for information and are more likely to base their decisions on adviser recommendations than those who are considering investing or not investing at all.

“This outlines the value advisers can offer investors when it comes to more complex assets,” the report said.

Key drivers of interest in private markets include the potential for higher returns and diversification benefits – 73 per cent of HNW investors are drawn to private markets for the opportunity to achieve higher returns, while 55 per cent seek to diversify their portfolios.

However, it also noted that there are numerous barriers to entry.

Among these are a lack of liquidity (40 per cent), difficulty in risk assessment (28 per cent), lock-up periods (23 per cent) and lack of knowledge (22 per cent) as the main barriers.

“Advisers can play a crucial role in helping investors navigate private markets. By leveraging their networks with private equity firms and venture capitalists and partnering with investment platforms, advisers can provide clients with exclusive access to investment opportunities that are not available to the general public,” Praemium said.

The asset manager also emphasised that advisers could create tailored strategies to align with their clients’ risk tolerance, liquidity needs, and financial goals, thereby ensuring a diversified approach to private market investments.

“This specialised support not only addresses the challenges of private markets but also strengthens the adviser-client relationship through enhanced, personalised services that add real value for the investor.”

Additionally, the report showed that the number of HNW individuals in Australia has surged to 690,000, marking an 8.7 per cent increase from the previous year. These investors now control $3.4 trillion in assets, up from $2.98 trillion in 2023. It also revealed that HNW individuals continue to prefer episodic advice, with 58 per cent seeking advice to validate their own opinions and 35 per cent identifying as self-directed investors, while those using an adviser have approximately 38 per cent of their wealth managed by an adviser, leaving 62 per cent self-managed.