Long the preserve of institutional and, largely in the last decade, UHNW individuals, 2025 is set to be a watershed year.
State Street’s recent annual global private markets survey found that retail investors are set to become the main source of private market fundraising over the next two years. Of its global base of 500 respondents from buy-side firms and institutional asset owners, 56% believe at least half of private market flows will come through semi-liquid, retail-style vehicles marketing to individuals within one or two years.
That is significant. While the widespread involvement of retail investors in stock markets is about 50 years ahead, you can’t ignore the sheer power and influence they have had; a force that has reached unprecedented levels in the last few years, buoyed by the rise of retail trading apps, and improved financial education.
For private markets, this is surely a long way off. But largely, they have outperformed equities over the long-term, and companies are taking longer to go public – a trend that has gone hand in hand with the decline in the UK stock market. So, there is potential for it to scale relatively quickly as an alternative.
For wealth managers looking to seize this opportunity, engage its existing client base and attract new ones, here are our key communication considerations:
The plans are reportedly to introduce private markets – from PE to private credit and infrastructure investments – to higher net worth clients with c. £500,000 to more than a million pounds to invest. But there are others considering selling to sophisticated customers who have smaller amounts to invest. As a new offering, this should stay focused: beyond investable assets, clients known to have a higher level of financial literacy and investment experience are engaged with their investment strategies and seeking more sophisticated diversification options. Start small with targeted campaigns and onboarding, clear articulation of the new proposition, gather feedback and then build out from that foundation.
Illiquidity in private markets has historically been cited as one of the biggest barriers to expanding retail involvement in private markets. Products like the Long Term Asset Fund (LTAF) do help address this and has now been expanded by the FCA to retail investors with caveats: they must be accompanied by risk warnings and customer assessments. Managers must match this with clear communication of the risks against the rewards: explainer videos, interactive tools, informative content and regular check-ins to assess tolerance against short and long-term goals. Regulatory, and media, scrutiny will follow, so prioritising best practice over commercial opportunity will stand them in good stead.
Where there might be a gap amongst wealth managers in expertise of the private markets space, and ability to navigate complex new regulation, partnerships and talent recruitment will be key – and something to shout about. Seeing commitment from their manager to building relationships, networks and know-how will go a long way to cementing trust in the offering, and communication teams should put these developments front and centre.
The next few years will be telling, with more innovation expected. The launch of Pisces (the Private Intermittent Securities and Capital Exchange System), while access is limited to institutional investors and HNW individuals, is still a sign of things to come in opening the doors to unlisted companies. Managers that navigate this effectively will be best placed to harness it.
