Offering private markets to clients is a must for wealth managers

New research reveals providing clients access to private markets is not an 'if' but a 'when and how'

Offering private markets to clients is a must for wealth managers
Steve Randall

Growing interest in private markets has made the decision of whether wealth managers should offer access to their clients a simple one.

That’s the key takeaway from new research that shows 94% of firms are either already offering clients access to alternative assets or working towards it.

The poll from fintech Delio which operates across across Europe, North America, Asia and Australia, also reveals that 65% of firms have transacted more than five private markets deals in the last 12 months, with 38% of managers involved in more than 20 deals.

Clients seeking greater returns and diversification in their portfolios have been showing increased interest in private markets and 88% of respondents reported that clients are seeking access to illiquid markets.

Alternative asset markets have remained relatively stable at a time of uncertainty and volatility for public markets.

Gareth Lewis, chief executive and co-founder of Delio, says that the challenge for wealth managers is not deciding if they should offer access to private markets, but how they can do so in a scalable and efficient way.

“While there is an inherent risk associated with these types of investments, the way that this manifests itself is very different from public markets,” he said. “The relatively illiquid nature of private markets means they are less affected by shifts in investor sentiment due to external factors, which we see in public markets regularly, and especially in the last few weeks.”

Investments of choice

Lewis says that he has seen a significant increase in wealth management firms offering direct investments in the past three years, while access to funds has dipped.

Impact investments, private credit and real estate make up the private markets offering of nearly a third of wealth management firms, while a smaller proportion enable access to hedge funds and even ‘passion’ investments, such as classic cars, fine wine and antiques.

Read the full list of winners for the Best Wealth Management Firms in Canada in 5-Star Brokerages 2023 special report.

Lewis has noted a rise in the private market offerings of firms since the pandemic, accelerating their planning around private market access as clients sought to mitigate the volatility in public markets in their portfolios.

“This forced slower adopters to speed up their plans to offer alternative assets to clients as they found themselves playing catch-up,” he said. “Meanwhile, earlier adopters were able to shift gears quickly and consolidate their market advantage as they accelerated client access to these types of investment opportunities.”