By Matt Walsh, Praemium
Alternative investments are increasingly viewed by high-net-worth (HNW) clients as a core part of their portfolio strategy, representing a fundamental shift in how sophisticated investors approach wealth building and preservation. Yet recent research reveals a concerning disconnect between what many investors are pursuing and what they’re being offered by their financial advisers.
The findings from The Alternative Advantage, a comprehensive study conducted by Praemium, show that while 62% of advisers now recommend alternatives, clients are often researching and accessing these investments through other channels. This trend points to a growing gap in the traditional adviser-client relationship that could have significant implications for the future of financial advisory services.
The research paradox
The data reveals a striking paradox in the alternatives landscape. Just 50% of HNW investors cite their adviser as their primary source of insight into alternatives. Instead, many are turning to peer networks (43%) or attending specialised events (38%) to inform their investment decisions. This shift toward self-directed research represents a departure from the traditional model where advisers served as the primary gatekeeper for investment opportunities.
Perhaps more telling, 43% of alternative investors say they took the initiative to invest after conducting their own research, compared to only 28% who say their adviser introduced the opportunity. This statistic suggests that while demand for alternatives is strong across the HNW market, many advisers may not be initiating the conversation early, or deeply, enough to maintain a central role in the investment decision-making process.
Preference doesn’t always match recommendation
Interestingly, the research shows that there is a notable misalignment between what advisers are recommending and what clients are actually choosing. While infrastructure is the most recommended alternative asset by advisers (85%), only 23% of HNW investors hold it in their portfolios. Meanwhile, venture capital and hedge funds – held by 45% of investors – are less commonly recommended by their advisers.
This gap is likely a result of the practical challenges advisers face with these assets, including limited access, intensive due diligence demands, or complex compliance requirements.
Even so, this misalignment highlights a valuable opportunity for advisers to revisit how they align their investment offering with their clients’ genuine interests and risk appetites, rather than defaulting to what may be more administratively convenient.
Education and access are key
Barriers to adoption still exist across the alternatives landscape. More than half (55%) of HNW investors who have not yet invested in alternatives cite a lack of knowledge as their primary obstacle. This represents a clear opportunity for advisers to reassert their value proposition, not just in providing access, but also through comprehensive education and ongoing guidance.
The education gap extends beyond basic product knowledge to include understanding of risk profiles, liquidity considerations, and how alternatives fit within broader portfolio construction. Advisers who can effectively bridge this knowledge gap position themselves as indispensable partners in their clients’ wealth management journey.
Practical steps to close the gap include:
- Initiating strategic conversations early – even if clients haven’t specifically asked. Framing alternatives as a tool for diversification, legacy planning, or ESG alignment can open meaningful dialogue about portfolio enhancement.
- Using managed funds and ETFs as a gateway to more illiquid, bespoke investments, particularly for clients newer to the alternatives space who may benefit from a more gradual introduction.
- Engaging proactively with platforms and managers who can offer institutional-quality access, transparency, and reporting on alternatives, ensuring clients receive professional-grade investment experiences.
A generational shift
Perhaps most notably, younger investors (aged 18–40) are showing strong intent to enter the alternatives space, with 81% saying they are likely to invest in the next year. This demographic is more open to innovation, including digital assets and cryptocurrency exposure, and is seeking greater personalisation in their investment approaches.
This generational shift represents both an opportunity and a challenge for traditional advisers. Younger HNW investors often have different expectations around technology integration, communication preferences, and investment transparency compared to older client segments.
For advisers looking to build their future HNW pipeline, ensuring a robust capability in alternatives is increasingly important, not just for current relevance, but for long-term client acquisition and retention strategies.
The path forward
Alternatives are a fast-evolving space, and clients are moving quickly to capitalise on opportunities. Advisers don’t need to overhaul their entire proposition overnight, but by starting conversations, deepening their knowledge, and reviewing access pathways, they can ensure their recommendations remain aligned with what today’s (and tomorrow’s) HNW investors are really seeking.
The key lies in moving from reactive to proactive engagement, positioning alternatives not as exotic additions but as integral components of sophisticated portfolio construction.
Download the full Alternative Advantage report from Praemium https://www.praemium.com/alternative-advantage/ to explore the key insights and learn how advisers are successfully incorporating alternatives into their client strategies.
