The results of a new survey from Direct Lending Investments shows that while more financial advisors are aware of alternative investment strategies, not all are confident in its security.
The survey of 300 financial advisors and family wealth managers across the country was conducted by SRSS during the first half of February.
First the good news. Two of three advisors believe private credit is a suitable client investment, and 70 percent believe the portfolio allocation for alternative investments will stay the same or increase before decade’s end.
Only half (51 percent) of advisors feel comfortable recommending private credit alternative investments to their clients. Lack of exposure to the right information is the biggest reason holding them back.
More than 60 percent of financial advisors have a limited understanding or private credit, so it is hard to recommend something they know little about.
That is reflected in alternative investment participation rates. Only one in three clients are using alternative investment vehicles and half are not using them at all.
Those numbers surprised Direct Lending Investments Founder and President Brendan Ross.
“The alternative lending space is booming, providing investors with opportunities for double-digit unfettered yield. Knowing there’s so much potential in private credit investments, we were shocked to learn from the survey that a large portion of financial advisors have a limited understanding of private credit and lack the right information to educate themselves and their clients.”
Mr. Ross added many advisors and their clients are losing out on what can be an important part of one’s portfolio.
“Conservative investors looking for high yields should consider private credit. Peer-to-peer lending is an attractive fixed income investment that not only improves when interest rates rise, but also lacks volatility and duration risk.
“It’s exactly this type of education that needs to be widely shared, so financial advisors can help their clients build their portfolios.”