HNW clients demand more non-custody assets: Study

More high-net-worth (HNW) clients are investing in non-custody assets as 75% of financial advisers report a growing demand in unique opportunities such private equity and other alternatives, a new survey from Praemium finds.

Such assets comprise an average of 26% of HNW clients' total portfolio value, the study conducted in partnership with CoreData showed.

Some 50% of HNW advisers predict that non-custody solutions will have either a growing or essential role in wealth management over the next three to five years.

About 37% of advisers said their clients invested in alternative assets in the last 12 months.

Such trends are particularly pronounced in portfolios above $6 million, where client sophistication and demand for direct investment opportunities drive adoption.

While direct shares, funds and real estate are the most common non-custody investments held, non-custody solutions are opening doors to private equity, direct real estate ownership, and alternative assets.

"Notably, 48% of HNW-focused advisers emphasise the importance of access to alternatives, while 49% value the ability to deliver total wealth solutions that integrate custody and non-custody holdings seamlessly," the report said.

There are still, however, several challenges advisers face when incorporating non-custodial assets.

Administrative complexity is a concern for 66% of HNW advisers, while knowledge gaps remain substantial as 53% report familiarity with these solutions.

Furthermore, many clients view non-custodial investments as higher risk due to concerns about liquidity and fraud.

"Proactive communication about these risks and demonstrating how non-custody solutions align with their broader financial goals can help mitigate these concerns. Interestingly, 23% of advisers noted more positive client feedback on non-custodial solutions compared to custodial ones, showing potential for increased acceptance," the report found.