The use of financial planners and advisers by high net worth (HNW) investors has remained constant over the past few years, but an increase in the HNW cohort has resulted in fewer investors seeking advice, according to Investment Trends.
At the same time, around half of HNW investors hold a higher view of professional financial advice than they did a year ago, the research group found in its “HNW Investor Report” released today in conjunction with wealth management platform PowerWrap.
The report revealed, based on Investment Trends modelling, there were 490,000 HNW investors in Australia in 2019, an increase from 460,000 in 2018 and 435,000 in 2017.
These numbers were drawn from a survey conducted online from July to August among 8492 investors, of which 2918 met the criteria to be considered an HNW investor, that is, they had $1 million in discretionary investable assets, including an SMSF but excluding their own home.
Investment Trends research director Recep Peker said around 80 per cent to 90 per cent of those considered HNW investors held an SMSF and across the survey the attitudes toward financial planners and advisers and their use by HNW investors remained high.
Peker pointed out that while 73 per cent of HNW investors accessed some form of financial advice, specific use of financial planners declined by around 3 per cent in the past year, as did the use of full-service brokers.
“One of the key things to note is that the proportion using a planner has been easing while the number of HNW investors has been growing, which means the total number of people using advisers has been steady from previous years, but newer entrants are less likely to be using financial advisers,” he said.
“The evidence for this comes through when looking at the ultra-HNW sector, those with $10 million-plus, who have a higher propensity to use full-service brokers. As you move up the complexity curve, the use of private bankers, wealth managers and brokers increases considerably.”
He said while there were fewer people using advice, proportionally, more people of a higher net worth were using and would be seeking advice and “while the trend appears downward, the demand for advice will far exceed what is being supplied right now”.
This was reflected in the current attitude to financial advice by investors who were considered ‘delegators’ and ‘validators’, who made up 47 per cent of respondents to the survey, he added.
He said around 30 per cent of the validators group would use an adviser to access a wider range of investments or to gain a second opinion and around 18 per cent would use an adviser for their technical skills.
“The market is changing and we have been hearing for a number of years that there are trust issues with planners, but the reality is the demand for advice is growing,” he said, adding 58 per cent of HNW investors reported having unmet advice needs.
“This is the highest rate we have seen. The demand for advice will exceed the supply and there are nearly 300,000 people who are complicated compared to the rest of the market who need advice, and who will provide that advice?”
In July, Investment Trends also reported that 315,000 SMSFs had unmet advice needs that ranged from tax and income strategies to planning for retirement and inheritance and estate planning.
