Financial Planning, HNWI

HNWIs to spur advice, structuring opportunities

Australia is set to see an unprecedented era of advice and services to HNWIs.

The rapid growth in the number of high net worth individuals (HNWI) in Australia will open up more prospects for advice and wealth structuring within the segment.

During a media briefing in Sydney today, NAB Private customer executive Jason Murray said there are an estimated 435,000 HNWIs in the country with over $1 million in investable assets, and as a collective they hold $1720 billion, excluding their home, business and super, but including SMSFs.

However, only 7 per cent of HNWIs have a private banker.

“Per capita, Australia is one of the wealthiest countries in the world. In the next 10 to 20 years, we will see the single biggest intergenerational wealth transfer this country’s ever seen,” Murray said.

“It means businesses are changing hands and wealth is being transferred to the next generation, so what it means for help or advice, in a formal sense, in financial services is hugely exciting.

“The high net worth segment of the economy is the fastest growing in the country so it’s a growth strategy of ours as a bank, and as the BRW rich list evolves [from property tycoons to technology entrepreneurs], the interest in wealth and asset management that exists now is only going to increase going forward.”

He said in the context of the banking royal commission and the current shake-up of the industry, he believed from an advice perspective Australia will enter an era of a much greater predominance of advice to HNWIs, and for those individuals who want to do it themselves, more structured portfolios of diversified assets.

“I don’t think the [wealth transfer] will be smooth. There’s a transformation going on across financial services whether it’s systems, strategy, regulatory, et cetera,” he said.

“But I think it does create opportunities, particularly coming back to the servicing, and we guide our private bankers to differentiate when they engage with their clients.”

He told selfmanagedsuper about 30 per cent to 50 per cent of NAB Private clients have an SMSF.

“High net worth banking isn’t just about banking, it’s about servicing and dealing with the complexities of HNWIs, and, not surprisingly, we have a large number of SMSF customers with large balances,” he said.

“SMSFs are often spoken about as a group or investor class in of itself, but interestingly we bring it right back to the customer level because behind every SMSF is a person.

“So to us, SMSFs are a structural overlay, so we don’t segregate our clients into SMSFs over here and family trusts over there.”

NAB Private, in conjunction with Investment Trends, identified the average asset allocation of HNWIs at the end of 2017 and found 34 per cent of portfolios were invested in property, followed by 28 per cent in direct shares, mostly domestic, and 11 per cent in all other investments, including private companies.

When it came to cash, HNWIs only held 10 per cent, followed by 7 per cent in managed funds, 7 per cent in term deposits and only 2 per cent in exchange-traded funds.

Murray revealed its client base is varied across professions, geography and regions, wealth origin, sources of wealth, demography, and level of knowledge and education.

“It’s a complete mixed bag across NAB Private and the level of sophistication of clients is not necessarily correlated with their professions either,” he said.

“Their main investment goal is to build a sustainable income stream, followed by achieving a balance of capital growth and managing risk.

“Today’s modern private banks assist with more complex financial needs and provide a single point of contact, seamlessly supported by a team of specialists to help make the most of opportunities and overcome challenges.”

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