Australian HNW investor numbers on the rise: Investment Trends

From

King Loong Choi

Investment Trends has released its flagship 2017 High Net Worth Investor Report, the largest annual study of Australia’s wealthiest investors.

The report, now in its tenth year, concluded in September 2017 and draws on responses from 1,483 millionaires in investable assets. This year’s study highlights a number of important trends:

Key highlights from the Investment Trends 2017 High Net Worth Investor Report:

  • Australian HNW investor numbers have risen for the first time since 2014
  • $100bn of cash is sitting on the sidelines as HNWs struggle to identify good investment opportunities
  • Advice providers need to more closely align their service proposition to the needs of HNWs if they are to grow their share of this valuable segment

Australian HNW investor numbers have risen for the first time since 2014

Australian High Net Worth (HNW) investor numbers have resumed an upward trajectory after stalling between 2014 and 2016. The latest Investment Trends research shows there are now 435,000 investors with over $1 million in investable assets outside of their own home, business and non-SMSF super. This figure has increased by 10,000 (or 2%) over the last 12 months following two consecutive years of decline.

Nationwide, the HNW population is estimated to control $1.7 trillion in investable assets, up 12% over the last 12 months. “Total investable assets collectively controlled by HNWs reached a five-year high in 2017, and this growth is driven by both an increase in the number of HNW individuals and also existing HNWs becoming wealthier” said King Loong Choi, Senior Analyst at Investment Trends.

“The growth in investable assets controlled by HNWs was led by those in the higher wealth brackets,” said Choi. “These investors – who predominantly draw their wealth from business profits, share investments, and property investments – have benefited immensely from the strong performance of both the Australian share market and property market over the last year”, explained Choi. 

$100bn is sitting on the sidelines as HNWs struggle to identify good investment opportunities

The total cash holdings of HNW investors is estimated to be $290 billion in total. More importantly, a third of this (or $100 billion) is considered by HNWs to be ‘excess cash’, or monies that would normally have been allocated to growth investments were it not for recent market volatility.

“Almost all HNW investors say they expect to face investment-related challenges in the coming year, and this uncertainty has led to a large build-up of cash holdings,” said Choi. “Right now, the perceived threat of another global financial crisis and difficulties in investment selection are the two biggest concerns of HNWs,” added Choi.

“Despite their muted outlook, half of HNW investors want material capital growth in their portfolios in the year ahead, and product manufacturers and technology providers play a vital role in assisting HNWs achieve their investment goals,” said Choi.

Advice providers must more closely align their service proposition to the needs of HNWs

The use of financial advisers among HNW investors fell to a five year low, with 68% of HNWs relying on the expertise of some form of financial adviser in 2017, down from a high of 74% in 2013. Despite this decline, there is a significant opportunity for advice providers to expand their footprint in the HNW market given that over half of HNWs (53%) say they have unmet advice needs.

“Right now, HNW investors have a range of unmet advice needs that most often centre around investment strategy and retirement,” said Choi.

“HNWs themselves understand that a single adviser may not necessarily possess the expertise to meet all their advice needs, with only 31% believing it is important that one individual provides an all-encompassing service,” explained Choi. “Advice providers could therefore adopt and promote a team-based approach to more effectively service the HNW market.”

About the report

The Investment Trends 2017 HNW Investor Report provides an in-depth understanding of the motivations, intentions, influencers and strategic positioning of Australian HNW individuals in relation to their investments. This is the largest study ever conducted in this space, drawing on responses from 1,483 Australian HNW investors (collectively holding about $1.7 trillion in investable assets). The report is focused on investors with $1 million to $70 million in net investable assets, excluding their superannuation, primary residence and own business, but including their SMSF assets.

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