Just over a quarter of high-net-worth investors (HNWIs) are not interested in seeing a financial adviser due to a lack of confidence in adviser expertise, according to research.
The ‘2023 High Net Worth Investor Report’ from Investment Trends and Praemium found around 27 per cent of HNWIs cited this as a reason to not get financial advice, which placed behind the top-rating reasons, “prefer to only seek advice when I need it” and “can manage my own financial affairs”.
Praemium chief strategy officer Denis Orrock tells Professional Planner this is likely part of the hangover from the Hayne royal commission.
“That’s the opportunity for the advice industry, to better sell the capability and what advice they are providing, and demonstrate the expertise that they do provide,” Orrock says.
“The biggest challenge for the industry… is to showcase the expertise and what they have been doing [to improve], especially around the educational development in the industry as well.”
The findings come amid the number of Australian investors holding more than $1million of investable assets increasing by 10,000 in the past year (from 625,000 to 635,000) with the number of those opting not to take advice remaining “persistently high”, according to the report.
Despite the cost of advice rising over the past few years, the perception that advisers cost too much fell from 32 per cent of HNWIs last year to 22 per cent this year.
The number of HNWIs that did not receive any investment advice last year increased from 60 per cent to 65 per cent, with many expressing they are willing to pay more to have their unmet advice needs addressed.
However, the average amount HNWIs were willing to pay was $2800 despite the average fee paid by HNWIs to investment advisers being $8748.
How advisers address that nearly $6000 value gap is “the $64 million question”, Orrock says.
“It comes down to the industry demonstrating value – outlining and being clear to the customer about exactly what they’re paying for and why,” Orrock says.
“That should be a fairly simple proposition. You’re dealing with people who are suitably successful, in their own right, and they should understand the value of quality service and outcomes.”
Despite a reluctance to seek guidance, HNWIs acknowledge a need for advice with inheritance and estate planning, intergenerational advice, and aged care ranking.
Orrock says it’s worth introducing the intergenerational wealth transfer theme early so clients can become comfortable with, rather than leaving it too late.
“And we are seeing a number from our customer base, financial advice and private wealth firms that are incorporating aged care practices and consulting into their business as part of that approach to intergenerational wealth transfers,” Orrock says.
The research found the 635,000 Australian HNWIs held $2.98 trillion in investable assets as of the end of the financial year.
Of the four wealth segments examined ($1-2.5 million, $2.5-5 million, $5-10 million and $10-70 million) the $2.5-5 million segment grew 24 per cent – the most significant growth in the past 12 months.
SMSF expertise will also need to be a key part of any advice offering, with 56 per cent in the $1-2.5 million bracket having SMSFs, which further rises to 90 per cent in the $10-70 million bracket.
“Your capability in that space is going to be critical as you grow that business,” Orrock says.