Stephen Furness

HUB24 has announced the launch of a new whitepaper, ‘Directing the matrix: meeting the advice needs of high net worth clients’, providing unique insights into what it takes for advisers to successfully service the nation’s growing number of high net worth (HNW) investors.

The whitepaper outlines key trends among these savvy investors, which represent a growing segment of the Australian population, often with complex needs that require professional financial advice.

The HNW segment in Australia is sizable and continues to grow with Investment Trends estimating 635,000 HNW investors collectively poured more than $2.98 trillion AUD into investments in 2023, up 3% from the previous year. This has primarily been driven by profits from direct shares and investments. Furthermore, the data reveals 66 percent of new entrants are more likely to be unadvised, representing a significant opportunity for financial advice practices.^[1]

While the average age of HNW investors is currently 60, data shows younger generations are contributing to growth in the segment. Those under 40 are estimated to make up 14% of Australia’s ultra HNW investors, with net assets exceeding $30 million USD.^[2]

The whitepaper leverages insights from financial advisers, who have successfully built an advice proposition for HNW clients.

Treysta Wealth Management Executive Director Mark Nagle says a lot of their clients in the HNW segment are self-made entrepreneurs and business owners.

“Our youngest client is in his 30s. He ran a tech startup and sold it to a big overseas company, so experienced a multi-million liquidity event.

“When you’re talking about HNW clients, the challenge is not generally a financial one, it’s an emotional one. They have built considerable wealth through a high-powered career or through owning a successful business. For years, they were usually the smartest, most powerful person in the room. In retirement, that all stops.

“That’s why we pivoted to a lifestyle planning approach. Even for HNW clients, it’s not about achieving investment outcomes, it’s about achieving lifestyle outcomes.”

To some extent, the money motivations of HNW clients mirror those of many other investors – saving for retirement, the desire to make a social impact, preserving wealth, passing assets on to family members and leaving a legacy. However, the quantum of the amounts involved increases the number – and complexity – of solutions available.

MGD Wealth Director Stephen Furness says HNW clients have often reached a level of financial security, so their investment journey is quite different to retail clients.

“These days it takes a lot more than a million dollars of investable assets to be in that position. Our clients were highly successful before they ever came to see us. Our role isn’t to make them more successful, it’s to steward their success and their wealth, to help them transition to the next phase of their lives.”

Cruz Family Office Specialist Nat Daley says on one level, the underlying issues for which the wealthy seek advice are the same as everyone else including getting out of debt, saving for something, and helping to manage cashflow.

“But for HNW investors, the quantum and complexity are obviously amplified 100 times, especially around family. Clients have come to us with some incredibly messy situations. Helping untangle them has undoubtedly brought marriages and families closer.”

Older HNW clients have ridden a wave of enormous asset growth over their lives in both equity and housing markets. It is these clients who are at the very centre of the enormous intergenerational wealth transfer that we will see over the next two decades.

The rising economic power of female investors is also a standout trend around the world that is redefining the way firms are approaching this segment. Research shows that females hold around a third of all Australian wealth and are expected to grow their wealth around 40% faster than males. Furthermore, by 2030, females are projected to manage two-thirds of all household wealth.^[3]

Elston Head of Philanthropic Services Susan Chenoweth says philanthropy can be a galvanising force, creating cohesion across multiple generations of a family.

“Every individual is motivated differently – giving can be rational and emotional. We find younger clients are generally more motivated to support environmental and social causes, and they also like to get more involved as volunteers. But across the board, we are seeing more focus on gender equity and diversity in giving. Mental health is also an area all generations are interested in.”

Contrary to popular belief, HNW individuals are not risk takers attracted to complex investment strategies, preferring more conservative and cautious strategies and more traditional domestic asset classes.

Wealth transfer for these clients can often involve the transfer of not only significant financial assets but also business ownership stakes, hence an important role of advice in this segment is to protect wealth and smooth the path for its transfer in the face of potentially challenging family dynamics.

HUB24’s Chief Growth Officer Chesne Stafford says the benefits of technology and automation is a game changer for advice practices as they seek to create efficiencies and improve productivity to meet the growing needs of their client base.

“Unsurprisingly, HNW clients take more time to serve. Research shows 86% of HNW clients want personalised offerings, and 91% of them say service quality, rather than expertise or investment returns, is the most important criterion when selecting a financial adviser.^[4]

“The advisers who successfully serve the HNW segment act as connectors, augmenting their own deep technical expertise with a network of the very best leaders and thinkers across a broad range of specialist disciplines including investing, tax, law, accounting and philanthropy.

“By making available technology solutions that increase efficiencies and productivity, we can empower advisers to deliver scalable solutions that meet the evolving needs of their clients.”

In response to the demand for better reporting tools to support client engagement and enable a complete view of client wealth, new data feeds and automation capabilities were recently added to the HUB24 platform, enabling advisers to obtain a holistic view of their clients’ asset allocation. The new features compliment HUB24 Present, a market-leading reporting capability co-created with advisers that enable them to customise presentations in real-time and increase client engagement.

This month, HUB24 also unveiled several changes linked to demand for HNW clients, such as the ability to trade unlisted domestic fixed income securities and direct foreign currency.

Download HUB24’s whitepaper, ‘Directing the matrix: meeting the advice needs of high net worth clients’.

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Select strengthens its partnership MGD Wealth.

The Select Asset Management Limited group (Select) and MGD Wealth Limited (MGD Wealth) have strengthened their partnership after the addition of a third portfolio, the LDI Connect 20 Portfolio, and achieving the milestone of $100m in total funds under management for the LDI Connect Portfolios, with the first 2 LDI Connect Portfolios, LDI Connect 3 and LDI Connect 7, having been launched in January 2012.

Select Fund Services is the responsible entity for the LDI Connect Portfolios while Select Investment Partners provides implemented portfolio services to MGD Wealth, the investment manager of the LDI Connect Portfolios through its Customised Portfolio Solutions (CPS).

Stephen Furness, Director and Head of Investment Advisory of MGD Wealth, said, “The launch of LDI Connect 20 to provide cash reserves to meet longer term liabilities than envisaged with LDI Connect 3 and 7 and along with the growth of the LDI Portfolios to over $100m in less than 2 years demonstrates the benefit of working with an experienced implemented portfolio consultant such as the Select group where they provide an “end to end” solution. It allows non-institutionally aligned wealth management businesses such as MGD Wealth to compete with the vertically integrated advisory businesses, adding value to our shareholders but more importantly to our clients by aligning them with our Liability Driven Investment process.”

David Yale, Executive Officer and Head of CPS for Select, said, “As with all of our CPS partners, we have structured the LDI Connect Portfolios so that MGD Wealth can offer their clients customised portfolios under their own brand and on their preferred administration platforms, that they control as investment manager, with Select Investment Partners providing them asset consulting and implemented portfolio services.”
The launch of MGD Wealth’s LDI Connect 20 Portfolio added to the earlier releases this year of CPS portfolios by DMG Financial Planning Pty Limited and Stonehouse Financial Services Pty Limited, advised by Select Investment Partners.

Mr Yale said, “We are currently in discussions with a number of other non-aligned dealer groups who are also looking for a new source of valuable and FoFA compliant revenue and/or extensive back office efficiencies with an institutional portfolio management capability that allows them to meet the best interest tests for their clients.” He said, “All of these potential CPS partners are looking for value and differentiation in their investment options for their clients beyond the use of a standard model portfolio implemented inefficiently by individual advisers.”

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