A Strong Private Markets Offering Can Help Advisors Differentiate Themselves from Their Peers and also Potentially Further Deepen their Engagement with High-Net-Worth Clients

New Cerulli research in partnership with Invesco and the Investments & Wealth Institute indicates that such offerings can help advisors improve client outcomes—but more education is warranted

DENVER, CO (October 30, 2023) – By offering an expanded shelf of private markets investments, advisors can differentiate their practices (81% agree this is a business impact of offering alternative investments), attract high-net-worth (HNW) clients (67%), and consolidate and retain assets under management (AUM) (66% each), according to Cerulli’s latest whitepaper, Adapting to Growing Private Markets: A Playbook for Practice Success, which was developed in partnership with Invesco and the Investments & Wealth Institute (IWI).

Cerulli, Invesco, and IWI all recognize the need to provide an objective assessment on how alternative investments are currently leveraged in client portfolios. This research was developed collaboratively to help share insights from advisors on how private markets can help both clients and advisors’ practices.

“We all share the same goal to provide advisors with unbiased education on topics that are top of mind to them, as well as to their clients,” said Tim Whiting, chief revenue officer of IWI. “By combining the power of Cerulli’s keen understanding of the advisor marketplace, Invesco’s broad alternative education platform, and the perspectives of IWI credentialed advisors, we developed an invaluable playbook that advisors can use to learn more about the potential benefits of alternative investments. Not only can the Cerulli research be found on a dedicated website of resources developed by Invesco, it can also be accessed via the current issue of our peer-reviewed Investments & Wealth Monitor publication, which is dedicated to insights and strategies on how best to serve high-net-worth clients.”

The research revealed that equity and fixed income market declines in 2022 spurred broad recognition among advisors of the need for greater diversification. This, coupled with vast innovation in alternative product development, has coalesced into greater demand for private market exposure. “It’s clear that advisors understand the importance of private markets investments as both a defense and offense tool at a practice level because they can use the exposures to better define their value proposition and help clients meet their goals,” says Daniil Shapiro, director at Cerulli. “If advisors have a focus on wealthy clients, implementing alternatives may also prove to be a commonsense way for a practice to move upmarket toward a coveted wealthier client base,” he adds.

Despite increased awareness and a set of prominent advisors who plan to allocate almost one-quarter of client portfolios to alternative investments through 2025, half of advisors report an alternative allocation of 5% or less. According to the research, lack of liquidity (56%), client education (44%), and product complexity/due diligence (39%) are fundamental challenges inhibiting greater adoption.

“Now more than ever, it is important for financial professionals to have access to robust educational tools and resources to help them grow and build their alternatives practices,” said John McDonough, head of Americas Distribution at Invesco. “Investor demand for private markets investments continues to grow, so financial professionals need to understand and clearly articulate the potential benefits of asset classes, structures, liquidity provisions, and individual products.”

The research recommends a multi-pronged educational effort that relies on communication and coordination across the distribution chain to address these challenges. Advisors prefer alternative product specialists/wholesalers and home offices for educational support (54% and 49%, respectively). Advisors also seek materials that provide educational value on liquidity and general education on discussing private markets with clients (48% and 47%, respectively).

“Robust educational and consulting resources can help advisors best represent the value of incorporating private markets within their clients’ portfolios,” adds McDonough.

“There is great potential in the efforts providers, technology firms, and home office teams are willing to dedicate to help advisors get up to speed,” says Shapiro. “We believe the future is bright for practices that can curate a holistic educational experience while streamlining the operational challenges associated with due diligence,” he concludes.

Survey respondents who informed Adapting to Growing Private Markets: A Playbook for Practice Success are actually IWI member advisors who hold one or more of IWI’s acclaimed certifications—Certified Investment Management Analyst® (CIMA®), Certified Private Wealth Advisor® (CPWA®), and/or Retirement Management Advisor® (RMA®) certifications. Cerulli conducted a comprehensive survey of more than 200 advisors on their use of alternative investments, with a focus on the implementation of the products into their practices. Cerulli concurrently held 25 research calls with advisors to gather qualitative insights, including the practice benefits and key challenges associated with their uptake of alternative investment exposures. Because of IWI’s focus on more sophisticated (greater AUM and higher core market) advisors, the survey responses are skewed toward advisors who are more likely to have allocated a higher-than-average amount of client assets to alternative investments. However, the research also shares insights more broadly to ensure it represents the advisor market at large.

For more information, contact Allison Edmondson at +1-303-850-3207 or aedmondson@i-w.org.

Invesco is not affiliated with Cerulli Associates or the Investments & Wealth Institute.

About Investments & Wealth Institute

Founded in 1985, the Investments & Wealth Institute is the premier professional association, education provider, and standards body for financial advisors. Through its award-winning events, publications, courses, and acclaimed certifications—Certified Investment Management Analyst® (CIMA®), Certified Private Wealth Advisor® (CPWA®), and Retirement Management Advisor® (RMA®) certifications—the Institute delivers Ivy league-quality, highly practical education to more than 30,000 practitioners annually in over 40 countries. Members of the Institute include the industry's most successful investment consultants, advanced financial planners, and private wealth managers who embrace excellence and ethics in applying a broad set of knowledge and skills in their daily work with clients. Learn more at www.investmentsandwealth.org.

About Cerulli Associates

For over 30 years, Cerulli has provided global asset and wealth management firms with unmatched, actionable insights. Cerulli Associates is a strategic research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.