The use of financial advisers by high net worth (HNW) investors has remained constant over the past few years and today. They hold a more favourable view of professional financial advice than they did a year ago. But the needs of these individuals are changing. HNW investors are becoming tech savvy. They’re also investing across complex products and demanding increased updates on their holdings. Fortunately, advisers are responding to these changing needs by updating their business models and re-thinking their long-term, operational strategies. They’re also leveraging technology platforms to offer improved service capabilities.
In this article we unpack some of the emerging trends of HNW investors and provide considerations for how your advice business can remain on top of their evolving needs.
According to research by Investment Trends, in the last year, half of HNW investors made substantial changes to their asset allocation, many attributing COVID as the catalyst1. The majority moved to make their portfolio more diversified or defensive and increased their exposure to equities, largely at the expense of cash and term deposits. As for the future – more HNW investors are keen to maximise their capital growth when selecting investments. They also expect the low interest rate environment to persist.
Advisers can help HNW investors navigate the low rate environment with more education, income focused products and greater investment transparency.
One of the rising trends among HNW investors is an interest in the different facets of socially responsible investing. Environmental, social and governance (ESG) considerations are now becoming part of their investment decisions. But while there is greater interest in adopting responsible investing principles, HNW investors feel they lack information about the performance, tax benefits and cost of responsible investments.
Advisers could consider a deeper dive into impactful and environmental investments – as well as donations – to help their clients find fulfillment and create a legacy. Broadening access to relevant education and product selection tools will also help them assess if these companies align to their goals.
As HNW investors grow wealthier, they’re increasingly using trusts to effectively transfer their wealth between generations. Research suggests HNW investors are using a trust structure to protect their wealth or effectively transfer it to their family1. But only a small proportion use an administrator, trustee service provider or investment platform to manage it. There is also a growing gap in intergeneration planning advice with less than half of HNW investors who use advisers, currently receiving it.
Advisers could provide more clients with intergeneration planning as part of their advice offering. This may also present an opportunity to develop new relationships with family members.
Australia is on the verge of its largest handover of wealth – an estimated $3.5 trillion worth – to be transferred from baby boomers to younger generations in the next 20 years2. As a result, financial advisers will have to prepare for an influx of new customers. Approximately 70% of financial advice clients are over the age of 503. By contrast relatively few millennials (7%) have ever worked with a financial adviser.
There is an opportunity to assist baby boomers in deciding how they transfer their assets – both money and property – who they want to give it to, and how to protect their legacies. Working with millennials as they inherit their parents’ wealth will also involve building new relationships with a new generation – who no doubt will have another set of advice needs.
1 Investment Trends – September 2020 High Net Worth Investor Report 2020 High Net Worth Investor Report_Nabtrade (002).pdf
2 www.perpetual.com.au/insights/new-research-reveals-australians-care-most-about-family
3 www.roymorgan.com/findings/7605-who-uses-financial-advice-professionals-201805250240
To speak to one of our High Net Worth Consultants about how they can
help your advice business remain on top of evolving HNW investor needs,
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This communication has been prepared by Godfrey Pembroke Group Pty Ltd ABN 38078629973 AFSL 245451 (GPG), a member of the IOOF Holdings Ltd ABN 49100103722 (IOOF) group of companies, The Bond, Level 3, 30 Hickson Road, Millers Point NSW 2000 , for use by authorised representatives of GPG.
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