Financial advisors to the wealthy want to invest more in alternative investments but a rift remains between them and asset managers.
A recent survey by Broadridge Financial Solutions and the Money Management Institute found that 82 percent of wealth managers are already using non-liquid alternatives and 73 percent are using semi-liquid alternatives. But while investment firms dedicated to alts make progress, most other asset managers aren’t catering to those needs. Less than 50 percent of investment firms support either of those categories of alternatives.
The survey results reveal “an untapped potential opportunity for asset managers to increase their offerings of alternatives-focused products, meeting demand for wealth managers who are already actively involved and plan to increase,” according to Broadridge and MMI. But many asset managers have no plans to capitalize on that.
Almost half of the asset managers surveyed offer non-liquid alts but out of the half who don’t, 32 percent have no plans to start. Only 40 percent of asset managers support semi-liquid alts and 42 percent don’t have any plans to start.
Meanwhile, the asset managers that already offer alternative investments are leaning further into them “proving they recognize the industry trends,” according to the survey. Thirty-eight percent of wealth managers said they want asset managers to invest more in distributing diversified products/asset classes.
According to a 2023 survey by EY, 48 percent of wealth management clients are satisfied with their alternative investments, a lower satisfaction rate than their actively managed funds (69 percent) and passive funds (57 percent).
There is also some divergence between asset and wealth managers on digital assets like cryptocurrencies, the survey showed. Just 6 percent of managers support digital assets and only 8 percent have plans to. Meanwhile, 20 percent of financial advice firms support those investments and 13 percent plan to.
Unlike pension funds, endowments and family offices that might allocate half their portfolios to alternatives, the vast majority of private investors invest little in them. However, individual investors collectively account for more than $140 trillion in assets, or more than half of global wealth, according to Bain & Company.