At a time when digital platforms and tokenisation are touted as key drivers for democratisation, the FT’s article “Talent shortfall limits funds’ ability to sell wealthy clients on ‘alts’” serves as a timely reminder that people remain an essential element in the future growth of the asset class.
Yet given the access to information surrounding the performance of these types of products (it’s no secret private markets have outperformed public markets over the last 20 years), hiring talented salespeople is only one piece of the wider democratisation puzzle.
Demand for retail-friendly private markets products is already surging. According to a report from CAIS referenced in the article, 85% of financial advisers want to increase allocations to alternatives in the coming year. Whilst a recent report from BCG and iCapital predicts that by 2025, HNWIs will account for more than 10% of all capital raised by private equity funds.
Onboarding and servicing this rising demand are where the real challenge begins. The friction and overheads associated with complex and inefficient onboarding processes have long acted as both a barrier to entry for non-institutional investors and a disincentive to managers make their products accessible to smaller investors.
CAIS’s report found that “more than half (55%) of advisors said that high levels of paperwork and administration challenged their adoption of alternatives”. Whilst Dechert’s 2024 Global Private Equity Outlook revealed that 91% of managers surveyed believe democratisation would compress fees.
Addressing the challenges thrown up by today’s costly and disjointed investment journey from fund selection, subscription and KYC all the way through to settlement is therefore essential. Without doing so, investing in salespeople may prove to be a costly hiding to nothing when hard-won investors are lost at the paperwork stage.
As is the case with sales, due to the complex nature of alternative investments, solutions must involve skilled people. In the case of onboarding this means bringing experts across Legal, Compliance and Tax who understand the complexities of the private markets onboarding process and regulatory requirements across multiple jurisdictions together with the technology to facilitate scalability.
Unlike sales, however, which is by nature a zero-sum game, investor onboarding is an industry-wide challenge which lends itself to a centralised, standardised approach, and there are providers, such as IDR, on hand to help.
