A recent U.S. Trust study quoted prominently in this month's cover story says high-net-worth clients are "most optimistic about their return on tangible assets, such as land, timber and investment real estate."
It was an unexpected finding given the fact that many investors are still recovering from the 2008 financial and real estate crisis. But the 2016 U.S. Trust Insights on Wealth and Worth Survey has data showing these illiquid, long-term investments are popular with certain clients.
Bank of America's elite wealth management unit surveyed 684 HNW adults, 30% of whom have $10 million or more of investable assets. Half of that percentage has more than $25 million, according to the report.
Those asset levels are high enough to cover the significant cost of making some of these investments and for qualifying for funding that can grab the largest properties. The study also shows that 60% of clients age 72 or older and 59% of baby boomers are more optimistic about tangible assets than about stocks, bonds, private equity and hedge funds. Younger investors are more bullish on the markets than on tangible investments, but, nevertheless, 58% of Gen X and 59% of millennials are still optimistic about these assets.
Armed with this data, U.S. Trust has been pointing out the opportunities and offering comprehensive services to clients who want to invest in real estate. Meanwhile, advisers at other firms, such as Scott Edwards, Michael Occhiuto and George Kursar of RBC, have also picked up on trend.
The RBC advisers have their own take on the kind of client who has developed an appetite for real estate investing. The trio suggests that these clients are hungry for higher yields and that they are savvy enough about the risks and liquidity.
"Our clients already have the expertise and direction of where they want to invest," Edwards says. "They come to us, and we help them fine-tune and sharpen their investment direction."
While it's good to be confident, it also remains important to be cautious with these types of investments, the advisers say.
"We always tell our client base that the potential opportunity is plentiful," Kursar explains. "But like every asset class, there is no guaranteed profit."