A third of high-net-worth clients do not want their adviser to discuss the intergenerational wealth transfer according to research from Investment Trends.
The researcher’s 2022 High Net Worth Investor Report found less than half (46 per cent) said their adviser does ask about the transfer of wealth during the advice process – down from 53 per cent in 2019. But 21 per cent said their adviser does not ask about this and would like them to do so.
However, a third said they do not want their adviser to ask about the wealth transfer.
Investment Trends head of research Irene Guiamatsia tells Professional Planner this presents a challenge for advisers.
“But a fantastic opportunity to approach the question with the sensitivity is required to the 21 per cent that want to have the conversation because that offers client acquisition ad infinitum,” Guiamatsia says.
“If you’re able to service families through generations, the onus to continuously acquire new clients diminishes.”
The research estimates almost $2 trillion worth of assets will be passed down to the next generation which equates to 70 per cent of their total assets.
Financial advisers are expected to be the main port of call for inter-generational planning discussions with tax optimisation and wealth preservation being the focus for those that do want to discuss the transfer of wealth.
Millionaires club holds steady
The number of HNWIs has eased over the past year, slightly down from 2021 but ahead of the end of 2020.
The population of those who control over a million dollars in investable assets was 625,000 in 2022, down from 635,000 in 2021, but still much larger than 485,000 in 2020.
Despite this decrease in overall population, the total level of investable assets largely held steady. Collectively, HNWs control $2.82 trillion, up from $2.72 trillion in 2021.
Guiamatsia says 2020 saw an excess of millionaires minted because of the market bubble created during the Covid-19 economic recovery.
“This huge stimulus that we had and the fact there was lots of cash in the system and people were not spending money,” Guiamatsia says. “Equity and property were rising fast.”
The research revealed that the proportion of HNWs making substantial asset allocation changes to their portfolio has tapered for the second year in a row with 37 per cent of HNWs making substantial asset allocation changes to their portfolio in the year to July 2022.
This cohort changed at least 10 per cent of their portfolio, significantly down from a 41 per cent change in 2021 and a record high of 50 per cent in 2020.
Trading ETFs
Before 2019, only 3-4 per cent of a HNW portfolio allocation was in ETFs which substantially higher than in years previous. In the last year that has risen to 7 per cent.
“We heard a lot about the growth of ETFs being driven by younger investors who entered the market, but ETFs have been used across the board including by HNWs,” Guiamatsia says.
While the increase is notable – and certainly an investment trend – Guiamatsia says the major priority is sustainable income.
“For HNWs the appetite for sustainable income is on the rise, so fixed income is an asset class we see where demand has increased,” Guiamatsia says.
