Advice providers need to keep up with the shifting preferences of HNW investors

King Loong Choi

Leading research firm Investment Trends has launched its flagship 2020 High Net Worth Investor Report, the largest annual study of Australia’s wealthiest investors (defined as those with over $1 million in investable assets outside their own home, business and non-SMSF super).

Now in its thirteenth year, the Report shows that there are 485,000 HNW investors as at September 2020 – a figure similar to 2019 (490,000) but still significantly larger than 2018 levels (460,000).

“The size of the Australian HNW population remains resilient despite tough market conditions at home and abroad. While the uncertain investing climate had minimal impact on market size, it has profoundly impacted the attitudes and preferences of HNW investors towards investing and advice,” said King Loong Choi, Associate Research Director at Investment Trends.

When it comes to their views about financial advisers, the Report reveals a significant growth in the ‘validator’ segment – described as those who would consider using an adviser because they value a second opinion, for their access to a wide array of investments, and their technical skills.

“The last 12 months saw a large shift in the perceptions of advice among HNW investors, with a sharp increase in ‘validators’ who are open to receiving financial advice (56%, up from 40% in 2019) and a corresponding fall in ‘self-directed’ HNWs who prefer making decisions on their own (34%, down from 49%),” said Choi.

The positive shift in attitudes towards advice providers, however, has not led to greater uptake. Over the last 12 months, the use of financial planners (19%) full-service stockbrokers (15%), wealth managers (7%) and private banks (5%) has largely remained static.

“The disjoint between the positive views towards advice providers and the current muted uptake of advice highlights how advice providers need to rethink their value proposition and delivery model,” said Choi.

“The uncertainties caused by the pandemic has prompted many HNWs to reconsider how they view professional financial advice, which presents a unique opportunity for advice providers to demonstrate their value-add – through their technical expertise, guidance and proactive communications.”

About the report

The Investment Trends 2020 HNW Investor Report examines the advice and product needs of Australian HNW investors, including their relationships with private banks, full-service stockbrokers, business banks and fund managers.

The 13th edition of the Report is based on a quantitative online survey of Australian HNW investors, conducted in September 2020. This is the largest ever study conducted in this space, drawing on responses from 2,578 HNW investors (collectively holding over $2.0 trillion in investable assets).  The Report is focused on investors with over $1 million in net investable assets, excluding their super, primary residence and own business, but including their SMSF assets (if any).