HNW clients seek 'wider investment universe': Praemium

According to research by Praemium and CoreData, financial advisers specialising with high-net-worth (HNW) clients are looking to non-custodial assets in order to deliver on their clients’ increasing demand for portfolio flexibility and high-touch service.

“HNW clients are increasingly seeking advisers who can offer a wider investment universe beyond traditional managed portfolios. Non-custodial solutions allow advisers to construct truly bespoke portfolios tailored to the client’s financial objectives, risk tolerance, and investment preferences,” the report said.

Findings showed that the large majority (85 per cent) of HNW advisers stated that a personalised approach was a key part of their sales proposition, while around half (46 per cent) see a bespoke investment strategy as a “top three strategy” for personalised service.

More than a third (35 per cent) of HNW-focused advisers noted an increase in non-custodial assets in the past three years, compared with 21 per cent of non-HNW advisers.

Looking to the next three to five years, 39 per cent of HNW advisers expect non-custody solutions to play an increasingly prominent role in client portfolios, while a further 11 per cent believe they will become a core asset as clients seek “direct control and diversification”.

In order to deliver on this, three-quarters (75 per cent) of HNW advisers have clients with non-custodial holdings in their portfolios, however, two-thirds (66 per cent) said administrative complexity was a concern when using non-custodial assets, along with challenges in consolidating reporting and performance tracking.

The report also revealed a substantial knowledge gap, with just over half (53 per cent) reporting familiarity with these solutions and 30 per cent admitting to having only a limited understanding.

Despite the apparent difficulties of the asset class, client demand is driving more HNW advisers to consider non-custodial solutions in order to access the benefits of broader access to alternatives, greater flexibility and independence, and the ability to offer a total wealth solution.

Praemium chief strategy officer Denis Orrock suggested that the successful implementation of non-custodial solutions hinges on advisers’ ability to educate not only themselves but also their clients on the asset class.

"High-net-worth investors are increasingly demanding bespoke investment strategies, and advisers must respond by building robust non-custodial solutions into their offering,” Orrock said.

“With the right platform partner advisers can seamlessly integrate custody and non-custody assets into a single, holistic view and fully leverage the opportunities presented by non-custodial solutions, addressing administrative complexities while delivering comprehensive reporting that meets the sophisticated needs of today's investors.”