Have any of your clients ever asked you about private equity investments? Did you have the information that they needed? If not, you are not unlike the majority of RIAs. According to one survey, 10% or fewer clients with an RIA are invested in a PE fund even though 70% of those clients have expressed interest in them.
A little over a 30% of RIAs ever offer their clients private equity funds. That is just one reason you could benefit from partnering with a trusted advisor. Here are 3 more.
#1: Access to Deals and New Opportunities
Traditional PE funds have rules that dissuade investors looking for liquid vehicles. For one, once invested in a private equity fund, your client is often unable to liquidate those assets until a lock up period, which can last from four years up to 13 years, has expired.
Another problem for RIAs is the requirements for investing. Most private equity funds will require an investment of at least $5 million. Individual investors are often locked out of opportunities at this level.
Currently, there are new investment vehicles that are eliminating these hurdles for individual investors. With help from a trusted advisor, you could offer your clients access to deals and new opportunities that many RIAs may not know about.
#2: Experienced Knowledge of Non-traditional Investments
Your clients may be expressing an interest in private equity funds but are they aware of the risks associated with these types of investments? Are you knowledgeable enough about it to give them the advice they need? Less than half (only 40%) of the RIAs surveyed felt comfortable with their knowledge of PE funds.
Before you can advise your clients on the pluses and minuses of alternative investments like PE and real estate funds, you need a better understanding of these instruments. In this instance, many RIAs could use the aid of a trusted advisor to fully understand their clients’ investment options.
#3: Comprehensive View of Investment Strategies
Finally, when advising your clients about alternative investments, it helps to have a clear and comprehensive picture of their investment strategy. How will those alternative investments fit in with their current portfolio? What are the potential consequences of new investment vehicles?
As your clients’ trusted advisor, they are counting on you to use all of the tools at your disposal including data analysis, financial forecasting and planning, compliance and reporting oversight, and more.
If you are unsure about the answers to the questions your clients have for you, it’s best to get the answer right rather than potentially giving them misinformation. Turn to an advisor you can trust so that you can be a better RIA to your clients.
Talk to a Trusted Advisor
Is there someone you already turn to for advice when your clients ask for something out of your area of knowledge? If not, we are here to help. We can be the access point that you need. Talk to our team of trusted advisors to help you serve your clients better.