By Matt Walsh, General Manager Distribution, Praemium
High-net-worth (HNW) clients increasingly seek investment solutions that reflect their unique preferences, financial goals, and desire for direct access to a broader range of assets. As competition for HNW clients intensifies, advisers who provide truly personalised investment strategies, incorporating both custodial and non-custodial assets, have a distinct advantage. Expanding portfolio options to include exclusive investment opportunities not only strengthens client relationships but also enhances an adviser’s ability to attract and retain affluent investors.
The increasing role of non-custody solutions
One major trend shaping the industry is the increasing demand for non-custody investment solutions. These solutions allow advisers to structure investments in a way that avoids the limitations of traditional custodianship while offering clients enhanced control, cost efficiency, and access to a broader range of investment opportunities. Unlike conventional custody models, where a financial institution holds assets on behalf of the client, non-custody solutions enable wealth managers to maintain direct oversight of their clients’ portfolios, offering bespoke investment strategies tailored to individual objectives.
Research shows that 85% of HNW-focused advisers prioritise a personalised approach in their client offerings. Nearly half (46%) see bespoke investment portfolios as one of their top three strategies for delivering exceptional service. Non-custodial assets such as private equity, real estate, structured products, and alternative investments play an increasingly important role in helping clients and their advisers achieve the customised portfolios they are seeking.
The report Creating Client Value with Non-Custody Solutions outlines that currently, 75% of advisers manage portfolios that include non-custodial holdings, which account for an average of 26% of total portfolio value. More than a third of HNW-focused advisers have noted a rise in non-custodial investments over the past three years, and half anticipate these assets will become even more prominent in the next three to five years. This trend is particularly strong among clients with portfolios exceeding AUD $6 million, where direct access to exclusive opportunities is highly valued.
The appeal of non-custody solutions to HNW investors
Non-custody solutions offer significant advantages to high-net-worth investors who require tailored strategies that align with their financial objectives and risk preferences. Key benefits include:
- Greater Investment Flexibility: Access to private equity deals, pre-IPO opportunities, direct property ownership, and collectibles enhances portfolio flexibility.
- Enhanced Transparency and Control: Clients can directly oversee their investment portfolios, ensuring their strategies align with evolving financial goals.
- Access to Alternative Markets: Non-custody solutions enable exposure to niche investments such as agricultural assets, private debt markets, and specialised hedge funds that may not be available within traditional custodial frameworks.
- Stronger Client Engagement: Providing a wider range of investment opportunities fosters deeper conversations and reinforces an adviser’s role as a trusted partner.
- Efficient Portfolio Structuring: Non-custodial assets can support tax planning strategies, income structuring, and capital gains management to optimise financial outcomes,
The report highlights that over 70% of HNW investors express dissatisfaction with standardised investment solutions, indicating a strong preference for bespoke advisory services. Non-custody models directly address this gap by offering wealth managers the ability to construct more sophisticated and flexible portfolios.
The role of technology in supporting non-custody solutions
Technology is playing an increasingly critical role in the implementation and management of non-custody solutions. Platforms are streamlining processes, improving transparency, and enhancing the client experience.
Key technological advancements driving the adoption of non-custody solutions include:
- Automated and scalable reporting: Digital tools enable seamless reporting on investments from valuations to tax so advisers can provide timely and accurate information to their clients.
- Data integrations: the ability to leverage data sources and API integrations to consolidate all investments onto the one platform, provides clients with a total view of their wealth and allows advisers to manage their clients wealth more efficiently and effectively.
- Modelling tools: Advanced modelling tools and calculators allow you optimise tax outcomes for your clients and reconcile transactions to ensure data accuracy, making non-custody solutions even more attractive.
- Improved Client-Adviser collaboration: Secure digital platforms facilitate real-time communication, ensuring that advisers can provide timely and personalised investment recommendations.
Additionally, the right platform technology can enhance the overall accessibility of non-custody solutions and allow for seamless execution and administration, reducing operational friction while improving data security. By leveraging technology, advisers can offer clients a more engaging and efficient wealth management experience, ensuring they remain competitive in a rapidly changing market.
Demonstrating value and building client trust
For wealth managers, demonstrating the value of non-custody solutions is crucial to attracting and retaining clients. The report shows that firms leveraging non-custody platforms experience, on average, a 22% increase in client retention and a 15% boost in referrals. This underscores the importance of aligning investment solutions with client expectations and providing clear evidence of the advantages these strategies offer.
Educating clients on the benefits of non-custody solutions is essential. Advisers can achieve this through personalised consultations, educational content, and investment case studies demonstrating successful portfolio outcomes which can further enhance client understanding and engagement.
The future of wealth management and non-custody growth
As wealth management continues to evolve, advisers who embrace non-custody solutions will gain a competitive advantage. Industry trends suggest that over the next five years, more firms will integrate hybrid wealth strategies, combining the security of traditional custodianship with the flexibility of non-custodial solutions. This will allow HNW clients to benefit from holistic wealth management, ensuring both diversification and cost efficiency.
Ultimately, the ability to offer customisable, sophisticated wealth solutions will be a key driver for future success. Firms that proactively integrate non-custody solutions into their advisory models will lead the next generation of wealth management, delivering greater value to clients while positioning themselves as forward-thinking industry leaders.
Download a copy the full research report at https://praemium.com/non-custody-research/
