Mathew Cassidy, Partners Wealth Group managing director.

As the cost of delivering advice soars, high-net-wealth clients are viewed as delivering the best return on investment for advice firms but the complexity of their advice needs means not every firm is going to be able to compete in the space.

Partners Wealth Group, which has launched Partners Private specifically to service HNW clients, is not worried there will be increased competition in the space.

Mathew Cassidy, PWG managing director, says although certain businesses were positioned to target that space most were not.

“You can’t [attempt] to deal with that high-net-worth client and not have a sophisticated offering – that takes a fair bit of investment and foresight to prepare your business for that,” Cassidy tells Professional Planner.

“There’s only a certain number of businesses that can play at that level. At that higher-end client level they want to speak the chief investment officer, they want to understand what’s going on as you’re moving forward. They want to have assets that not everybody is finding, so you have to gear your business to do that.”

Cassidy acknowledged the cost of advice has gone up substantially and that many firms are left with no choice but to focus on that market segment.

Research from Investment Trends found the HNW segment remained steady during the Covid-19 pandemic and a CoreData study in the UK found contrasting results between HNW and mass-market adviser/client relationships with only the former broadly seeing an improvement.

However, he says small and medium sized businesses did not have the resources to effectively target the HNW market.

“There’s a select number of businesses that can play at that level and you have to have years of experience and understanding to do it,” Cassidy says.

“There’s a small segment of the client base that just want pure investment advice but there’s a demand for more holistic needs and that’s the way we’ve tailored our business for that.

“Has that changed between this year and last year? No, it’s becoming more prevalent as people have all these demands as their wealth gets greater.”

Cassidy says what clients demand more of is a broader service offering.

“Over the last couple of years there’s a huge growth in peoples’ wealth and they’re demanding more services but they’re not sure where to find it and the sophisticated offering they need,” Cassidy says.

“Therefore, what we are seeing is the consolidation of more wealth businesses that know they need to play at that level but decided they can’t do it themselves so they join forces with others that can.”

What clients look for

Cassidy says the higher the net worth the greater the complexity, and those clients are not looking for a standard portfolio.

“You need to think differently about the advice needs for those clients and with access to more investments around the world,” he says. “If you’re just giving them vanilla assets then you’re not adding as much value as they demand.

“There’s a large degree of clients that may want to do a fair amount of the wealth [investment] themselves, but will never find the investment ideas or opportunities that come to people that are focused on that every day and have really broad networks.”

Despite HNWs holding substantial amounts of capital, it is still relatively limited in terms of investment which is where the value of investment management comes in.

“They’re not able to spend $20 million to $30 million on an asset that we can collectively, so our ability to syndicate assets for a group of clients and get access that individuals can’t themselves is a competitive advantage,” Cassidy says.

“You’re going to have a larger emergence of this high-net-worth client that maybe wants to do part of it themselves with index funds and everything else but wants some broader ideas to do it.

“Most advisers miss out on that segment because they’re self-directed and that’s a growing segment of the market you need to cater for if you want to be dealing in that part of the market.”

One comment on “HNW might be holy grail, but firms will have trouble chasing the space”
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    Very relevant article in respect of my own experience being a HNW. For an adviser to be able to assist me they would need to show they can add value in a meaningful way that I can’t add myself. For example if I decide to increase my current exposure in commercial property I would seek advice from a professional in that area. If I need detailed advice on a specific strategy in my SMSF I have a professional who can advise. In the sharemarket I run a manage the manager model for direct funds investment and have a relationship with five of the six funds I invest in. It’s a combination of having a very good accountant, extensive research on one’s own and knowing where to seek specific advice.

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