While super funds may be required to chase mass market advice, high-net-worth clients will drive demand for independent financial advisers, according to research.
The ‘2023 State of Wealth Report’ – from private wealth firm LGT Crestone and researcher CoreData – found that, across all age cohorts for high-net-worth individuals (HNWIs), there is a desire to work with “independent” financial advisers (40 per cent) compared to a ‘bank-aligned’ adviser (20 per cent), a company that is aligned with a bank or institution (18 per cent) or a super fund (10 per cent).
The research did not define the ‘independent’, leaving interpretation of the laden term in the hands of HNW respondents.
The report also states that almost half of HNWIs (48 per cent) either rely on advisers to “largely take care of everything and keep them informed” or “rely on them strongly as a critical source of information and decision-making support”.
“Meanwhile, older HNWIs are more likely to work with independent financial advisers not aligned with a bank or another institution,” the report states, adding that wealthy individuals aged 50 and over seek advice from independent or super fund-affiliated advisers (18 per cent).
The findings come amid debate over the government’s response to the Quality of Advice Review which is expected to give super funds more flexibility to give advice to help bridge the advice gap in Australia.
Despite a broader scope for super funds to give advice, the report found that tailored and highly personalised advice is the “winning approach” for the HNWI market.
“Financial advisers are well-positioned to provide such a tailored and individual service and it is worth considering how HNWIs are interacting with advice professionals and what they are valuing most from this relationship,” the report said.
“For some, the idea of a ‘money coach’ who keeps them on track, much like a personal trainer, is a desirable attribute of advisers; however, access to lesser-known investments, particularly alternative and private markets, may also be another reason to seek and value financial advice.”
Self-direction
A prominent characteristic of HNWIs and ultra-high-net-worth individuals (UHNWIs) is their inclination to be self-directed, according to the report.
This relates to their desire to be engaged and informed about their investments and, as a result, perhaps feel more confident than other investors to make these decisions themselves.
Despite this, however, the report adds that 52 per cent of individuals still depend on advice or seek information to make informed decisions.
This trend is more prominent among UHNWIs, as 31 per cent of them are likely to work with an adviser compared to 24 per cent of HNWIs.
Additionally, UHNWIs show a higher tendency to handle things themselves (25 per cent versus 21 per cent for HNWIs).
“However, there has been a significant decline in the number of HNWIs who are semi-advised or who want to do things themselves but also seek reliable information to help support their decision-making,” the report said.
“This cohort has fallen from 23 [per cent] in 2021 to 13 [per cent] in 2023.”
The report said this might be because more people are reacting to recent inflation and increases in costs of living.
“A new world order rising out of Covid-19 pandemic warrants professional financial advice
more than ever, particularly in the areas of asset allocation, family wealth advisory and philanthropy,” LGT Crestone CEO Michael Chisholm said in a statement accompanying the report.
