Emerging trends of high net worth investors

The use of financial advisers by high net worth (HNW) investors has remained constant over the past few years and today. They hold a more favourable view of professional financial advice than they did a year ago. But the needs of these individuals are changing. HNW investors are becoming tech savvy. They’re also investing across complex products and demanding increased updates on their holdings. Fortunately, advisers are responding to these changing needs by updating their business models and re-thinking their long-term, operational strategies. They’re also leveraging technology platforms to offer improved service capabilities.

In this article we unpack some of the emerging trends of HNW investors and provide considerations for how your advice business can remain on top of their evolving needs.

Growing and protecting wealth

According to research by Investment Trends, in the last year, half of HNW investors made substantial changes to their asset allocation, many attributing COVID as the catalyst¹. The majority moved to make their portfolio more diversified or defensive and increased their exposure to equities, largely at the expense of cash and term deposits. As for the future – more HNW investors are keen to maximise their capital growth when selecting investments. They also expect the low interest rate environment to persist.

What does this mean for advisers?

Advisers can help HNW investors navigate the low rate environment with more education, income focused products and greater investment transparency.

Social and ethical mindsets take centre stage

One of the rising trends among HNW investors is an interest in the different facets of socially responsible investing. Environmental, social and governance (ESG) considerations are now becoming part of their investment decisions. But while there is greater interest in adopting responsible investing principles, HNW investors feel they lack information about the performance, tax benefits and cost of responsible investments.

What does this mean for advisers?

Advisers could consider a deeper dive into impactful and environmental investments – as well as donations – to help their clients find fulfillment and create a legacy. Broadening access to relevant education and product selection tools will also help them assess if these companies align to their goals.

Higher use of trusts

As HNW investors grow wealthier, they’re increasingly using trusts to effectively transfer their wealth between generations. Research suggests HNW investors are using a trust structure to protect their wealth or effectively transfer it to their family¹. But only a small proportion use an administrator, trustee service provider or investment platform to manage it. There is also a growing gap in intergeneration planning advice with less than half of HNW investors who use advisers, currently receiving it.

What does this mean for advisers?

Advisers could provide more clients with intergeneration planning as part of their advice offering. This may also present an opportunity to develop new relationships with family members.

The great wealth transfer

Australia is on the verge of its largest handover of wealth – an estimated $3.5 trillion worth – to be transferred from baby boomers to younger generations in the next 20 years². As a result, financial advisers will have to prepare for an influx of new customers. Approximately 70% of financial advice clients are over the age of 50³. By contrast relatively few millennials (7%) have ever worked with a financial adviser.

What does this mean for advisers?

There is an opportunity to assist baby boomers in deciding how they transfer their assets – both money and property – who they want to give it to, and how to protect their legacies. Working with millennials as they inherit their parents’ wealth will also involve building new relationships with a new generation – who no doubt will have another set of advice needs.

¹ Investment Trends – September 2020 High Net Worth Investor Report 2020 High Net Worth Investor Report_Nabtrade (002).pdf

² www.perpetual.com.au/insights/new-research-reveals-australians-care-most-about-family

3 www.roymorgan.com/findings/7605-who-uses-financial-advice-professionals-201805250240