High net worth (HNW) investors are more likely to be interested in steady investment returns and wealth protection rather than complex investment products, according to a whitepaper.

HUB24’s “Directing the matrix: Meeting the advice needs of high net worth clients” whitepaper draws on adviser insights and case studies to better understand how to service HNW clients.

The paper said it is common for clients to prefer safer investments that offer a steady return.

“The picture of HNW individuals as big stakes risk takers attracted to ‘exotic’ and complex investment opportunities is not borne out in reality,” the paper said.

“Indeed, various studies point to them being quite conservative and cautious, preferring more traditional domestic asset classes.”

Referring to the Investment TrendsHigh Net Worth Investor Report’, the paper notes the top three asset classes for HNWs allocations are direct shares (33 per cent), residential and commercial property (29 per cent), and cash and term deposits (14 per cent).

The motivations of HNW clients are similar to other investors, the report noted, with saving for retirement, the desire to make a social impact, preserving wealth, passing assets on to family members and leaving a legacy as key drivers – but how these needs are catered to still differ.

“The quantum of the amounts involved increases the number – and complexity – of solutions available,” the paper said.

“Older HNW clients, such as baby boomers and beyond, have ridden a wave of enormous asset growth over their lives in both equity and housing markets. It is these clients who are at the very centre of the enormous intergenerational wealth transfer we will see over the next two decades.”

Changing demographics

The whitepaper notes that 88 per cent of HNW investors are self-made and come from varying backgrounds.

“As tempting as it is to think of HNW investors as one homogeneous group – that is stereotypically largely male, middle-aged, and professional – in reality, today’s HNW client is just as likely to be a female entrepreneur or a young IT whiz,” the report said.

The paper notes that while studies suggest the average age of a HNW investor is around 60 years old, younger Australians are a growing part of the segment with under-40s estimated to make 14 per cent of Australian ultra-HNW investors.

“The rising economic power of female investors is also a standout trend around the world and is redefining the way firms are approaching this segment,” the report said.