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Robert Picard highlights the importance of clearly communicating the value of illiquidity
Key Takeaways
- Open communication and full transparency about illiquidity is key to helping your clients get comfortable with private markets.
- Advisor-client discussions about illiquidity should focus on the client’s long-term goals and where they are in life’s journey - basically how much liquidity they need and when they need it.
- Investing a portion of a nest egg in private markets means committing to investments that are illiquid from three to ten years, for which you need to be rewarded with improved returns.
Transcript
My name is Robert Picard. I head up private market solutions at Hightower Advisors. Hightower is a community of 135 separate advisor businesses and wealth management firms spread across the United States in approximately 34 different states.
The way I approach the discussion about illiquidity, first of all, you have to be very transparent. You have to communicate. It's a partnership. Our advisor businesses are the fiduciary. They know their client the best, and it's really a discussion with the client to understand how much liquidity they need, where they are in their life journey, and how they want to approach the liquidity or illiquidity of their portfolio.
We're very clear: private markets are not short-term investments. These are three, five, ten-year investments. And for that illiquidity, you need to be rewarded with improved returns. But again, we argue two sides. On one hand, it's long-term. On the other hand, we also talk about how this is sort of your nest egg. This is the part of the portfolio where you’re planting seeds that will reward you with significant, meaningful returns, but over many, many years. It sort of eliminates that want to constantly trade.
When you buy your home, you're not buying your home to sell it in three months. You're buying your home for five, ten years to grow your family. Hopefully, it will appreciate in value, but you'll continue to still invest in that home. It's the same thing with private markets, where we really have to look at it as a long-term investment, where you'll really get the reward for it the longer you hold it.
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