Platforms constraining advisers’ ability to deliver access to alternatives: Report

The Q3 2024 research from Praemium and CoreData has found that a third of advisers find it difficult to give clients access to alternative assets through their primary investment platform, with 10 per cent of advisers claiming it is impossible.

As high-net-worth (HNW) investors continue to show mounting interest in the asset class for its diversification and return advantages, Praemium believes the ability of investment platforms to provide access to alternative assets will become increasingly important.

As such, the research showed that HNW-focused advisers in 2024 have shown a “clear preference” for platforms offering a wider range of investment options, particularly those that provide access to non-custodial assets.

With HNW advisers more than 2.5 times as likely as non-HNW advisers to already be using non-custodial assets, 28 per cent and 11 per cent, respectively, Praemium believes platforms that can deliver greater choice of assets will continue to grow their share of the HNW advice market.

Highlighting this, Praemium said a strong correlation can be drawn between a client’s wealth and the allocation of alternative assets in their portfolio, with high wealth leading to increased prevalence of such assets.

As such, the research found that advisers managing client portfolios valued above $20 million are seeing alternatives make up an average of 14 per cent of the portfolio.

Furthermore, 9 per cent of portfolios at HNW-focused advice firms are invested in alternatives on average, more than twice as much as firms focused on less wealthy clients.

Interest in alternatives is expected to grow into the future, according to Praemium, with 69 per cent of HNW-focused advisers viewing alternatives as key to meeting their clients demands while also being twice as likely as non-HNW advisers to consider alternative assets a “vital part of meeting clients’ future demands”.

Praemium chief strategy officer Denis Orrock said this growing trend is top of mind for the platform provider as it works to meet the demands of the HNW adviser market.

“The research aligns with what we are seeing on our platform, with alternative assets growing by around 20 per cent per annum to total around $6 billion in funds under administration. This increasing demand reflects the critical role these investments play in the portfolios of high-net-worth clients,” Orrock said.