Expert: Adam Harrison, Titanbay. Facilitator: Chris Shaw
Headlines:
- General acceptance that wealth of HNWI's and UHNW's is rising and there is increasing interest in private market investment.
- Recognition that private market investment is not appropriate for all client firms.
- Clarity is needed over the regulatory requirements placed on firms when introducing clients to private market funds.
- Wealth managers need better tools and information to be comfortable in this space.
Context:
General acceptance that wealth of HNWI’s and UHNW’s is rising:
Agreement that reports by Oliver Wyman and PWC reflect the experience of most practitioners. HNW and UHNW investors have greater access to funds and are increasingly aware of stories of “unicorns”. These reports of higher 'institutional' returns are difficult to ignore when set alongside more pedestrian retail returns and low barriers to entry to crowd funding etc.
Private market investment not appropriate for all firms:
Some firms deal exclusively with UHNWI’s on specific mandates, knowing that those clients take advice, or invest elsewhere, in private markets. Consequently, they are comfortable that the client has full access to the whole marketplace and thus can focus service on the specific mandate agreed with the client. Other firms deal with clients more consistently in the lower levels of the HNW space and private market investment was considered a distraction and risk which would be counterproductive for the client and the firm. The majority of firms sat between these two points.
Clarity needed over the Regulatory requirements:
Naturally, there was much discussion around Regulatory requirements and specifically could, or how could, an investor be classified as “professional investor” and “retail investor”? This appears a complex but far from insurmountable issue and an area which seems primed for Regulatory change as the market matures.
Wealth managers need better tools and information:
Recognising the direction the market is taking and the opportunity to talk to clients (where appropriate) about Titanbay’s private markets proposition was very appealing to firms. There was general recognition that work was needed to ensure clarity from the Regulator on key issues and to ensure that firms understood the full benefits and shortcomings of particular private market funds so that they could feel fully supported in the work they undertake for clients.
As a new form of investment for traditional “retail” clients the job of education should not be underestimated and this may well be the greatest “risk” to the advice community. Experience shows us that poor explanation or understanding inevitably leads to problems further downstream.
Key Takeaways:
- The verdict is to proceed with caution when it comes to private market funds
- Clarity is needed over the regulatory requirements placed on firms when introducing clients to private market funds
- Wealth managers need better tools and information to be comfortable in this space
- Recognising the direction that the market is taking and being able to talk to clients about the opportunity of this new concept, where appropriate, is very appealing to firms
- Each firm should understand the benefits and shortcomings and be able to fully express these to the client and regulator
