Matt Schiffman

A rising number of Australian investors are seeking out professional financial advice and have considerable trust in their advice, according to the Legg Mason 2016 Global Investment Survey.

Legg Mason surveyed 4,103 high net worth investors aged from 40 to 75 (“investors”) and 1,267 high net worth investors aged 18 to 39 (“millennials”) about their investment goals across 19 global markets.

The survey revealed that 33% of Australian investors seek out professional sources for financial advice, up from 27% last year.

The survey reveals that there is a real opportunity for financial advisers to provide advice as Australian investors view them to be the most trusted source of advice when it comes to investing, with 72% of investors responding that they had total trust in professional financial advisers. The total level of trust investors have in financial advisers was higher than all other sources of advice: family (42%), financial news (48%), forums (19%) and online platforms (18%).

When it comes to super, 62% of Australian investors agree that seeking the advice of a professional financial planner is a key way to improve understanding of their super. This is despite a large number of Australian investors (53%) losing confidence in the super system due to various changes in government.

Comparing different age groups across the globe, millennial investors were more likely to use financial advisers than older investors (80% and 46% respectively). A similar pattern was shown in Australia with millennials here twice as likely to seek help from a financial adviser at 65% (compared to 33%).

The survey also revealed that female investors across the globe are much more likely (54%) to trust their family/ friends/ co-workers for advice than men (33%).

Commenting on Australian attitudes towards financial advice, Legg Mason’s Global Head of Distribution Marketing, Matt Schiffman, said: “While advisers are being used by an increasing number of Australians, there are still many investors in Australia not receiving professional financial advice. This is creating a real opportunity for financial advisers to develop a clear and concise value proposition in their own marketing to investors.”

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Matt Schiffman

When it comes to investing, Australians are the least willing to embrace new technology, according to the Legg Mason 2016 Global Investment Survey.

Legg Mason surveyed 4,103 high net worth investors aged from 40 to 75 (“investors”) and 1,267 high net worth investors aged 18 to 39 (“millennials”) about their investment goals across 19 global markets.

Survey respondents were asked about their willingness to use a wide variety of investment platforms such as apps, mobile investing, online, automated advice and social media.

Australian investors trailed behind their global counterparts, with only 4% responding that they were prepared to embrace technology when investing, compared to the global average of 38%.

Across the global regions surveyed, Asian investors were the most keen to embrace investment technology, with 47% saying that they will embrace these channels when investing, followed by Latin America at 34% and the US and Europe both at 11%.

Asian investors also had a better understanding of investment terminology, with 46% of investors answering questions on ‘rate of return’ correctly, compared to the global average of 44%.

Across the individual types of technology platforms, within Australia purchasing investments through an automated online advice platform was the most popular choice at 5%. However, this was significantly lower than the 37% average for global investors.

At 2%, Australian investors registered that the least popular way to purchase investments was through a social media platform, which was also the least popular globally.

Global investors from US and Asia considered using apps to purchase investments as their most popular platform at 29% and 52% respectively. This contrasted with only 3% of Australian investors willing to use apps when investing.

Unsurprisingly, when looking at different age groups, Australian millennials (aged 18-39) were more open to using technology (22%) when investing than Australian investors over the age of 40 (4%).

However, the Australian millennial respondents’ willingness to use technology was significantly lower than the average global millennial investors’, of which 55% were willing to embrace technology when investing.

Commenting on Australian investors’ reluctance to use technology when investing, Legg Mason’s Global Head of Distribution Marketing, Matt Schiffman, said: “These results highlight that Australian investors are lagging behind the investment technology curve.

“Australian advisers and investors alike should recognise the opportunities that technology can bring in making more informed investment decisions alongside face-to-face advisory services.”

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Matt Schiffman

Australians value structure and planning most highly in their relationship with their advisers, compared to global investors who are focused on performance, according to recent Legg Mason research.

Surveyed as part of the Legg Mason Global Investment Survey, which looked at the attitudes of over 4,200 investors in 20 countries, Australian investors were asked to name the top benefits of working with an adviser. Some 59% of respondents said creating a formal financial plan to achieve their goals was the best thing about working with an adviser.

Other key benefits named in the survey by Australian investors included avoiding costly mistakes (46%), and having someone to manage their entire portfolio (43%). Globally, investors nominated the opportunity for better investment performance as their top benefit, with 59% saying this was the best thing about working with an adviser.

Legg Mason’s Global Head of Distribution Marketing, Matt Schiffman, said the results demonstrated that Australians valued a structured approach to financial advice, with clear goals that made it easy to measure their success.

“Australians are less focused on tracking the annual performance of the investments their adviser recommends as a measure of success,” said Mr Schiffman. “For Australian investors, the experience of using an adviser is more about developing a long-term plan for financial independence.

“As more Australians reach retirement, they are thinking about planning for a comfortable lifestyle 20 or 30 years into the future and how an adviser can help them get there”, he said.

The survey also revealed that Australian usage of advisers was slightly lower than among global investors as a whole, with 27% of Australian investors saying they work with an adviser compared to 36% globally. Mr Schiffman said this presented an opportunity for more advisers to add value to the Australian investor experience, particularly when it came to setting investors on a stable path to financial independence.

“Globally we have seen a trend towards increased investor confidence in markets where large amounts of investors work with an adviser,” said Mr Schiffman. “Given Australians’ relative pessimism compared to global investors – only half of Australians think they will be able to maintain their current lifestyle later in life, compared to 75% globally – advisers do have a key role to play in helping investors to feel more confident in achieving their financial goals.”

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Matt Schiffman

Australians are vastly more conservative investors than their global counterparts, and may be missing out on key opportunities to improve returns, according to Legg Mason’s 2015 Global Investment Survey.

The survey, which looked at the attitudes of over 4,200 affluent investors in 20 key markets, found Australian investors were particularly conservative and unwilling to take on more risk for the chance to boost their income.

Overall, 77% of Australians described themselves as somewhat or very conservative, compared to the global average of 59%. Only 29% of Australian investors were willing to increase their risk tolerance for the opportunity to earn more income, compared to 66% of global investors.

Legg Mason’s Global Head of Distribution Marketing, Matt Schiffman, said the results demonstrated a shift in priorities as a greater proportion of Australian investors grow closer to retirement.

“Australians as an investor group are less willing to consider risk as an option to grow their wealth and boost their income”, said Mr Schiffman. “With a growing number of local investors either in or reaching retirement, focus has shifted towards protecting their assets in years to come, and avoiding big drawdowns in the event of a market decline.”

Retirement dominates Australian investor concerns

The survey also identified that Australian investors mainly invest to ensure a comfortable, independent retirement. Asked what their primary investment goals were, 71% of respondents said their goal was to maintain a comfortable lifestyle later in life, while 58% said it was to avoid depending on others in retirement.

Just 51% of respondents said their key goal was to grow their wealth, indicating a shift in priorities from capital growth to income generation among the Australian investor cohort.

When asked what might derail their goals, 36% of respondents were still fearful of another global market correction, while 32% said their biggest concern was not saving enough for retirement. A further 32% were concerned about outliving their retirement funds.

Australian investors were also currently struggling to achieve desirable income yields on their investment. Respondents expected an average 8.6% annual return on their investments, but were currently getting closer to 6.6%, indicating a ‘reality gap’ of 2% between actual and expected returns.

“It’s interesting to note that while Australian investors are very focused on retirement when it comes to structuring their portfolios, they are also concerned that their current allocations are not going to be enough to sustain their future needs”, said Mr Schiffman. “As they grow older it seems local investors are struggling with balancing market risk and longevity risk, and they may not feel they have the investment tools available to adequately deal with these issues.”

Australians still favour property above all else

Australian portfolios display a pronounced bias toward property, with local investors allocating an average of 27% of assets to investment real estate compared to global investors’ 16%. Australian investors also allocated significantly less to equities, at 20% of total assets compared to 28% for global investors.

Australians were also less interested in investing outside of their home market. Only 36% said they would be increasing their focus on international investments in the next year, compared to 67% of global investors.

Australian investors also believe diversifying out of their home market would not have helped them achieve better returns – when asked what they would do differently if they could invest all over again, only 7% of respondents said they would be more diversified globally, compared to 30% of investors across all markets. Instead, Australians nominated investing too late as their biggest investment regret, with 51% saying they would have started investing earlier if they could turn back time.

“Australians are much more comfortable investing at home than abroad, and they continue to be particularly attracted to property, perhaps because of the associated tax efficiencies and recent price growth in key markets,” said Mr Schiffman. “However, their bias towards one particular asset class could mean they are missing out on key sources of capital growth and income.”

Australian investors less confident about the future

The survey indicated that Australians as an investor group are significantly more pessimistic about their investment progress than global investors as a whole.

While 78% of investors worldwide said they were progressing well towards not depending on others in retirement, only 50% of Australians said they were progressing well against this goal. Only half of Australian respondents said they thought they would be able to maintain their current lifestyle later in life, while 75% of global investors thought they would be able to achieve this goal.

Mr Schiffman said the findings demonstrated Australian investors were not as optimistic when it comes to the future investment environment. “Despite several years of healthy returns and strong economic growth, Australians are still not convinced that their investments are progressing as they want them to. This may be an indication that, especially given the current low interest rate environment and their preference for conservative products, they may need to start to broaden their horizons if their investments are going to progress to the high standards they hold them to.”

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Matt Schiffman

Satisfaction rates among Australian adviser clients are the highest in Asia and second highest in all major global markets, according to recent Legg Mason research.

Among those who use an adviser currently, client satisfaction was extremely high relative to the rest of the world. A solid 40% of respondents indicated they were entirely satisfied with their adviser’s services – a figure higher than every other major market than the US, and significantly above the global average of 14%.

The Legg Mason Global Investment Survey looked at the attitudes of 4,200 investors in 20 key markets, including 200 high net worth Australian investors. It found that 36% of Australian respondents currently work with a financial adviser, while 28% were interested in doing so in the future.

When asked for the top three benefits working with an adviser can bring, the majority of respondents (58%) said creating a formal plan to achieve their goals was a key benefit. Globally, just 34% of respondents viewed investment planning as a top benefit, suggesting Australians are particularly fond of a structured approach when it comes to financial advice.

“The survey data overall paints a very positive picture for Australian advisers”, said Legg Mason’s Global Head of Distribution Marketing, Matt Schiffman. “Compared to their global peers, they are doing a great job at meeting client needs, and helping investors to create a long-term plan for success forms a key part of that.”

Australian investors also singled out helping to avoid costly mistakes (47%) and access to investment opportunities they could not get themselves (43%) as other key benefits of working with an adviser.

“Australian investors have enjoyed a buoyant market, and their advisers deserve credit for capturing that upside”, said Mr Schiffman. “By using their expertise to steer clients through the volatility of the post-GFC years, Australian advisers have ensured a loyal and satisfied clientele.”

Despite the high overall level of satisfaction, investors nominated several areas where advisers could improve, including lower advisory fees (36%); being more proactive (30%); and looking for more innovative investment solutions (24%).

“There is always room for improvement in any industry, and financial advice is no different, despite the high overall standards we observed in Australia”, said Mr Schiffman. “Local investors are after a back to basics approach with more of the simple things – low costs, greater engagement and more creativity in the solutions advisers bring to the table.”

“As a proven innovator in the Australian asset management space, Legg Mason is committed to helping advisors find creative income solutions to share with their clients”, Mr Schiffman concluded. “The results of this survey demonstrate that the appetite is there for new and unique approaches to wealth creation, particularly in regards to retirement.”

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