Over the last few years, the world of institutional investing has entered the UK retail sector.
Many investors have continued to search near and far for returns and have increasingly looked at alternatives like private equity and private assets.
Therefore, firms in the advice market are looking to start offering these types of investments.
Leigh Philpot, head of client proposition at UK-headquartered wealth manager Kingswood, said to International Adviser: “We believe that private clients deserve the same opportunity set as institutional clients.
“We would like to play a part in democratising investment strategies and managers that were previously only available to select areas of the market.
“This is good for Kingswood, but should also lead to enhanced outcomes for our clients and those firms we work with.
“The delivery mechanism is what is important as it needs to be in an easy to purchase and sell vehicle that caters to their needs and is competitive in the marketplace.”
Why?
If firms believe that institutional-like investments are the future of retail, why has this become the case?
“The demand is mainly driven because of the asset allocation conundrum faced by investors at the moment – low bond yields offering little value and an over-reliance on equities,” said Philpot.
“The private client industry has also increased its exposure to alternatives and other non-traditional investments over the last 20 years and we see this trend continuing.
“We see this as an opportunity to be at the leading edge of delivering solutions that can work as part of diversified portfolios.”
Understanding the issues
These types of investments are not easy for the everyday investor to understand.
What needs to be done to help clients?
“There will definitely be an education hurdle that needs to be overcome, and this comes down to the one-on-one client service model that advisers have with their clients,” said Philpot.
“Suitability of these strategies for clients rests with advisers, but we will assist with the resources and materials required for this as part of our proposition.”
If there is going to be more products in the sector, should the regulator get involved with educating the public?
Philpot added: “The regulator will focus on mis-selling of products more than the product themselves.
“We will demonstrate why these investments are suitable for retail investors due to their liquidity, risk profile, fees etc.
“Where these investments are marketed or sold to the detriment of clients, that is when the regulator should step in.”
Trend
Where is the future of the retail market going?
“Over time, absolutely, I would say that most firms are diversifying their product offering to take account of the changes in investment trends,” said Philpot.
“Some 20 years ago most retail clients had portfolios largely of UK equities and gilts.
“With an increasingly globalised world and opening up of investment strategies this has radically changed.
“We are convinced this trend will continue. The search for decent returns ahead of inflation with low levels of risk will always be there.
“We are now able to bring more of these investments to retail clients.”
