Wealthy Australians seek private market access and advice in uncertain macroeconomic conditions
Michael Chisholm
LGT Crestone has released its 2023 State of Wealth report, polling Australia’s high net worth (HNW) and ultra-high net worth (UHNW) individuals to reveal how theinvestment approach of the nation’s wealthy has been impacted by the challenges of today’s post-pandemic environment.
The HNW group includes investors with $1M in investable assets. UHNW indicates a minimum $10M in investable assets.
The fourth annual State of Wealth Report exposes a transition in investor behaviour and sentiment triggered by major macro changes, characterised as a period of ‘re-set’.
LGT Crestone’s Chief Executive Officer Michael Chisholm said the research helps to contextualise patterns of decision-making amongst this influential cohort of Australian investors. “It’s no surprise that the macroeconomic and geopolitical forces shaping our world are also shaping the mindsets of Australia’s wealthy, and the research findings deepen our understanding of these shifts and the impact for portfolio strategies.”
“With inflationary pressure and market turbulence top of mind, HNW and UHNW individuals are seeking opportunities for growth by way of diversification, demonstrating a strong appetite for private markets resulting in a broader spread of allocations across asset classes.”
Mr Chisholm continued, “While equities and cash remain the two largest current investments, closely followed by real estate, this proportion has dropped in 2023 as HNW Australians widen their exposure to investments to include emerging markets and various private alternatives.”
With a heightened readiness to reallocate investments, data shows that wealthy investors are looking to trusted financial advisers to help navigate this ‘reset’.
“HNW and UHNW individuals recognise the importance of trusted financial advice, arguably more so in periods of unstable market conditions. Also given the difficulty finding information, research and access to alternative and private markets investments, the adviser plays a critical role in guiding HNW clients around these decisions. This ‘guiding hand’ principle cannot be understated.”
“Further, our data shows that HNW and UHNW individuals with a financial adviser experienced higher levels of both engagement and enjoyment as opposed to those who did not have trusted advice. This is a clear articulation of the critical role advice plays not only in effective portfolio management, but investor gratification.”
Balancing returns with personal values
The 2023 State of Wealth findings reveal that returns continue to be a dominant driver of decisions, impacting the way HNW and UHNW individuals approach sustainable and philanthropic investments.
“Wealthy individuals are eager to have their personal values – including those related to climate change and societal wellbeing – expressed in the way they are investing. Yet in the face of uncertain economic conditions, returns are the predominant driver of choice for this type of investing. One of our priorities is addressing this myth that you need to sacrifice returns to invest sustainably.”
“We’re seeing that HNWIs who identify financial advisers as their primary source of advice are more likely to actively seek sustainable investments, reflecting the strong role advisers play in helping individuals identify and invest in this space in a way that works for them.”
Wealth transfer still on the to-do list
According to the report, nearly two thirds of HNW individuals do not have a wealth transfer plan in place, despite the majority having intentions to develop one.
“Despite its importance, it is evident that developing a clear plan remains a huge challenge for wealthy Australians. Even for the many individuals who recognise the need for a transfer strategy, the obstacle is simply where to begin.”
“The wealth transfer process is one that is deeply personal and unique to each family. We see a significant need for assistance from trusted advice professionals to help introduce the discussion and broaden it to include more family members.
Mr. Chisholm concluded, “A new world order rising out of COVID-19 pandemic warrants professional financial advice more than ever, particularly in the areas of asset allocation, family wealth advisory and philanthropy.”
The State of Wealth report is based on independent research conducted by CoreData, comprising Australia’s most comprehensive study of the investment and lifestyle habits of HNW and UHNW individuals.
