Why alternatives expertise is essential for HNW advisors

Why alternatives expertise is essential for HNW advisors
Survey of advisors and high-net-worth investors points to education, recommendations as vital drivers in relationships.
OCT 08, 2024

A new survey from Brookfield Oaktree Wealth Solutions highlights a growing appetite for alternative investments in the high-net-worth space, which could create opportunities for advisors to the affluent.

The survey, conducted by CoreData, assessed both investor and financial advisor sentiment across the US and Canada, focusing on individuals with at least $2.5 million in investable assets. It also included financial advisors managing an average of $633 million in assets.

According to the study, an overwhelming majority of investors already holding alternative allocations are interested in ramping up their exposure. Eighty-eight percent of those using alternative assets are open to increasing their investments, while 78 percent are seeking a broader range of options. Another 81 percent of HNW investors believe that alternatives will yield stronger long-term outcomes compared to traditional portfolios, while more than half said they'd be comfortable having at least 20 percent of their portfolio in alts if their advisor were to suggest it.

For those not yet invested in alternatives, interest remains strong. Seven out of 10 such respondents said they would consider investing if they had a better understanding of the options available (72 percent) or if recommended by their financial advisor (70 percent).

John Sweeney, chief executive officer of Brookfield Oaktree Wealth Solutions, noted the role of advisors in this growing demand.

"Demand for alternative investment products among high-net-worth investors is growing exponentially, and our proprietary research highlights how deeply investors want their advisors to lead the way," he said in a statement.

The survey also found that financial advisors aren't blind to the value of alternatives. Seventy-two percent of advisors agreed expertise in alternatives is beneficial across multiple fronts including growing their business, improving client satisfaction, enhancing absolute returns, and reducing revenue volatility.

Another 85 percent reported that alts have improved their discussions with clients on portfolio construction, while 91 percent emphasized the importance of building a strong knowledge base in alternatives, particularly as 41 percent of high-net-worth investors in the survey said they've let go of or would consider switching from their current advisor if someone else could give them better access to high-quality alt opportunities..

“By developing and leveraging their alternatives expertise, advisors can differentiate their practice in the market, recruit new prospects, and deliver significant value by helping their clients maximize the opportunities ahead, Sweeney added.

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