Bringing you live news and features since 2006 

Platform frustration for advisers and DFMS with UHNW clients

Advised clients are missing out on superior returns due to technical restrictions with many platforms, a new report by NextWealth has stated.

The NextWealth MPS Private Assets Report reveals strong appetite for including a wider range of investment options into MPS from DFMs with the main limiting factor being managing them via platforms.

Heather Hopkins, managing director at NextWealth comments: “The average portfolio size of the largest discretionary MPS providers is GBP60,000 and most don’t go above GBP200,000. DFMs told us that to access higher net worth customers, they need to offer a more sophisticated proposition but this is not possible because platform tech has not evolved far enough, nor consistently enough, to make holding alternative investments practical.”

Recent reports show that higher net worth customers are investing in alternatives and private equity and that these have consistently outperformed public markets, states NextWealth. They continue that advised customers are potentially missing out on higher investment returns because of the limitations of some platforms.

McKinsey’s 2021 Global Private Markets Review reports that private equity has outperformed public market benchmarks over the last five-, 10-, and 20-year periods. The report states that on a pooled basis, private equity has produced a 14.3 per cent annualized return over the trailing 10-year period, beating the S&P 500 return of 13.8 per cent by 50 basis points.

Capgemini’s World Wealth report found that Millionaires Next Door and ultra-high net worth (UHNW) individuals are more likely to invest in alternatives. UHNW individuals are defined as having wealth of USD30 million. Millionaires Next Door have between GBP1 million and GBP5 million. UHNWI direct 17.7 per cent of their portfolios to alternative investments and Millionaires Next Door, 11.8 per cent.

Heather Hopkins comments: “The industry is moving at the pace of the slowest platform, to the detriment to customer choice and investment outcomes. Most DFMs want a consistent proposition across all platforms and so are forced to use widely available mutual funds. We’ve all witnessed the challenges of holding illiquid assets in open ended funds with the recurring drama of property fund closures. DFMs want to hold illiquids, including private equity and other alternatives, through investment trusts but some platforms can’t properly support holding closed ended funds and in particular fractional shares. The laggards are slowing innovation across the market.”
 

Latest News

Cerulli Associates, writing in the latest issue of The Cerulli Edge, analyses mutual fund and ETF flows as of December..
BUX, described by the firm as one of Europe’s fastest growing neobrokers, with more than one million users in Europe,..
SIX Swiss Exchange reports that the number of ETFs listed on SIX Swiss Exchange increased by 25 in the fourth..
Ossiam has announced the launch of a new ETF, the Ossiam Shiller Barclays CAPE Global Sector Value, listed on five..

Related Articles

ETF
We are very pleased to open the voting for service providers (selected by nominations) and ETP issuers, selected by our data partners, Trackinsight, for the European ETF Express Awards, in...
Bitcoin
Osprey Funds’ founder and CEO, Greg King, has written an open letter to Barry Silbert, majority owner of Digital Currency Group which owns Grayscale, suggesting that he uses his powers...
Captain
Comparing multifactor ETFs to the popular Marvel Avengers series may seem a bit of a stretch but recent analysis from Morningstar suggests the investment strategies have more in common with...
Mackenzie
Canadian asset manager Mackenzie Investments, with CAD186.6 billion under management, has published its annual Mackenzie Investments Year-End ETF Report. ...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by