Capital Markets Insights

Fighting the Commoditization of Wealth Management – How Investment Advisors Can Leverage Private Placements to Their Advantage

Investment advisors today face one key challenge – creating value in ways that can resist the increasing commoditization of wealth management. Decades ago, executing simple stock market trades were expensive affairs requiring calls placed to a broker (who often also provided stock recommendations). Now, they are commoditized affairs where the main differentiator is price.

The same thing is happening in portfolio management. Index-based investing strategies have become extremely popular. But they are also far from unique, resulting in them also being highly commoditized and automated (think robo-advisors). The result is intense fee pressure to combat client churn – a race to the bottom. This is a race investment advisors can ill afford, especially against VC-backed fintechs who are only all too happy to take upfront losses to acquire customers and grow market share.

The big question for investment advisors is – how can they fight commoditization by creating value in a way that also keeps clients within the advisors’ own ecosystems?

Is the Common Answer in the Fight Against Commoditization Sufficient?

A popular piece of advice to investment advisors has been to resist commoditization by focusing on holistic financial planning and behavioral coaching. This is sound counsel. These are not only relatively immune to automation, but also more personalized – playing to individual advisors’ unique strengths.


And the data also shows that providing such planning and coaching has a real effect on portfolio returns. Vanguard’s “Advisor’s Alpha” shows that even in an index portfolio, having an advisor can provide an extra 3% in annualized returns. Over a 30-year period, the advised portfolio is almost three times larger.

In short, holistic financial planning and behavioral coaching is a powerful lever that investment advisors should pull on. But it may not be enough. Other investment advisors are also rushing into this area, intensifying the competition.

Fortunately, there is another often-neglected lever that investment advisors can also pull. And that’s access to exclusive investment vehicles – such as private placements.

Private Placements – Exclusive Content in a Netflix World

Netflix has dominated the streaming world for years. But Disney+ quickly broke into the scene, garnering 100 million subscribers in just 16 months – a feat that took Netflix 10 years. Disney+’s key success factor? Exclusive access to content built around distinct and highly in-demand intellectual property.

It’s not a perfect analogy, but private placements can play a similar role in investment advisors’ battle to stand out in a commoditized field. Private placements are relatively untouched by consumer-facing fintechs. Meanwhile, investors are always clamoring for access to investment vehicles perceived as hard to reach and potentially able to deliver superior returns. Demand for private placements is likely only to keep increasing.

This makes private placements a strong lever for investment advisors. The only problem – the lever is slow, creaky, and half-broken.

The Slow, Creaky, and Half-Broken Private Placements Lever

The first challenge is deal visibility. A company’s investment advisors will inherently be spread out across the country, with multiple satellite offices to provide support. While this is a necessary structure, it also leads to silos and a lack of transparency. 

How can a company ensure all the investment advisors within their network have the same visibility to its private placement deal pipeline? At Katipult, we’ve heard stories of clients bringing private placement deal opportunities to their investment advisors (instead of the other way round). This is obviously not ideal. If every investment advisor had complete transparency into the private placement deal pipeline, the number of clients that could be offered such opportunities could multiply exponentially.

Next is internal inefficiencies that jeopardize the investor experience and potentially cause client churn. The onboarding process is one key example. Redundant and time-consuming onboarding processes can easily lead to investors churning halfway through. Then,  in the process of subscribing to a private placement deal, mistakes and omissions can result in a frustrating back-and-forth that results in delayed deal completion (plus lower retention). To top it all, inconsistent deal updates generate unpleasant uncertainty.

Fixing the Private Placements Lever with Katipult

At Katipult, we build tools that investment advisors can use to take full advantage of private placements’ potential. Our centralized digital deal platform removes silos and provides transparency to investment advisors across the entire network. From there, investment advisors can manage the whole process, including deal creation, subscription documents (which are auto generated and populated), and providing deal updates.

On the onboarding side, our investor KYC software reduces errors and redundancies using “smart” forms that match the fields shown to the investor’s specific profile. This cuts back on friction – slashing upfront churn – and making it easier for investment advisors to onboard clients into their “private placements ecosystem”. Client retention gets a nice boost as well as they benefit from a digital platform for KYC and accreditation renewals..

Battling the Commoditization Tide

As technology progresses, more aspects of investment management will become increasingly commoditized. Investment advisors will have to stay nimble and adapt. But as of now, they have two powerful levers at their disposal to resist. Focusing on holistic financial planning is a proven path, leveraging their access to private placements is another.


Let Katipult help you with the latter. Find out why Raymond James chose us to distribute alternative equity investment products across its financial advisor network, and how we’ve helped other Tier-1 clients like Canaccord Genuity, TSX Trust, and Echelon Wealth Partners. Contact us to learn more.