Advisers under-allocating to alts, says Artivest survey
Advisers consider alternative investments key to growing their high-net-worth (HNW) business, but a lack of access to quality products stands in the way of larger allocations to the asset class, according to a financial adviser survey commissioned by Artivest.
The majority of financial advisers surveyed (54 per cent) believe that offering alternatives is important to retaining and attracting HNW investors, yet lack of access to quality funds was the number one reason (26 per cent) why advisers believe their adoption of alternatives is lower than that of institutions.
Advisers also cited higher retail client fees (22 per cent), the length of time to identify and select managers (17 per cent) and account paperwork/administration being too cumbersome (10 per cent) as other top reasons for lack of adoption.
The Artivest investor survey, which polled 163 financial advisers at the 2016 Morningstar Investment Conference, suggests the perceived lack of access to quality products creates a tremendous missed opportunity for advisers looking to grow their business and generate HNW clients. In fact, nearly three-fourths (73 per cent) of advisers surveyed believe that alternative investments should make up more than 5 per cent of a client’s overall investment portfolio.
Among this percentage, 43 percent of advisers consider the ideal allocation to alternatives to be between 15-25 percent, which is much higher than the current actual level of allocations to alternatives that have been reported in the industry (around 5 per cent to 10 per cent). Those advisers who believe alternatives help attract HNW clients are three times as likely to want to allocate 15 per cent or more of their clients’ portfolio to alternatives.
“We have seen an increase in demand for alternative investments from high-net-worth investors, and this survey confirms that advisers recognise the value of incorporating alternative investors in a client portfolio,” says James Waldinger, founder and CEO of Artivest. “As demand continues to grow, there is a clear need for greater adviser education around the vehicles available to access real, high-quality alternatives in a more efficient way.”
Survey findings reveal that advisers additionally recognise the importance of technology in attracting HNW clients, particularly among the millennial generation. An overwhelming majority (90 per cent) of advisers surveyed indicated that a good digital experience is necessary to attract millennial HNW clients.