As the high-net-worth sector expands to almost half a million people in Australia, huge opportunities are opening up for a shrinking pool of advisers according to a new report released by researcher Investment Trends.
According to the report there are 490,000 HNW people – defined as having over $1 million to invest sans the family home and superannuation – in Australia; a 13 per cent increase since 2017. Investible assets in the group have climbed 21 per cent to just over $2 trillion in the period.
The number of people with over $10 million to invest – characterised as ultra-HNW – has increased from 15,000 to 20,000 in the last year alone.
However, as the overall HNW sector has grown the number under advice has stayed the same, so the proportional percentage has decreased from 38 per cent in 2008 to 26 per cent today.
According to Investment Trends research director Recep Peker, there is a demographic trend behind the decline.
“The number of people who use advisers is actually quite steady, it’s just the newer ones coming into the HNW segment that are not using financial advisers,” Peker explained at the launch of the report.
He noted that the ultra HNW, especially, have a “higher propensity” to use stockbrokers.
Despite this, the sentiment of HNW investors is shifting towards advisers as their needs become more complex, Peker said. One of the biggest trends to emerge from the study is that the needs of HNW people are no longer in silos.
“They’re feeling that their needs aren’t really being met because they aren’t necessarily one thing, but a wider range of areas,” he said.
Usage of private bankers has remained steady, Peker reckons, but satisfaction is dropping. The remit of stockbrokers, on the other hand, is increasingly being seen as too narrow.
“Back in the day, you had someone transact in Aussie equities for you,” he said. “But if you don’t think Aussie equities are going to do well… stockbrokers are less relevant to the market.”
Meanwhile, the view of HNW investors towards financial planning has improved in key areas over the last 12 months. 29 per cent say they would use an adviser to access a wider array of investments, up from 22 per cent last year. 28 per cent said they would use an adviser for a second opinion (up from 24 per cent), and 17 per cent said they would use an adviser for their technical skills (up from 15 per cent).
The net result is a positive outlook for financial planners, Peker surmised. Rising numbers will create the opportunities and the needs of clients are trending towards their skillset. While increased education standards and the grandfathered commissions ban are putting pressure on advisers, an expanding advice gap will eventually put a premium on adviser services.
“The big thing is that while the trend is downwards, if you try and understand what will happen in the future, what we’re finding is that the demand for advice will far exceed what’s happening right now,” he said.
The Powerwrap/Investment Trends HNW Investor Report collated responses from around 8,500 investors, almost 3,000 of which were HNW.