Financial Planning

Wealthy investors not engaging with advice

wealthy investors financial advice

High net worth investors have indicated they like the idea of financial advice, but few have taken steps to actually receive any, according to Investment Trends.

The number of wealthy investors in Australia has remained stable over the past 12 months and while more of them have indicated they are open to some form of financial advice, the actual take-up of that advice has remained low, according to Investment Trends.

According to the research firm’s “2020 High Net Worth Investor Report”, there were 485,000 high net worth (HNW) investors – that is, those with more than $1 million in investable assets outside their home, business and non-SMSF super – as at September 2020. That figure is a slight decrease from 490,000 in 2019 and a marginal increase from the 2018 level of 460,000.

Investment Trends associate research director King Loong Choi said while the size of the HNW investor sector had remained stable, the COVID-19-driven market movements had changed their views on the role of financial advice.

“The size of the Australian HNW investor population remains resilient despite tough market conditions at home and abroad. While the uncertain investing climate had minimal impact on market size, it has profoundly impacted the attitudes and preferences of HNW investors towards investing and advice,” Choi said.

“The last 12 months saw a large shift in the perceptions of advice among HNW investors, with a sharp increase in ‘validators’, who are open to receiving financial advice (56 per cent, up from 40 per cent in 2019), and a corresponding fall in ‘self-directed’ HNWs, who prefer making decisions on their own (34 per cent, down from 49 per cent).”

He added that while HNW investors may value the second opinion of an adviser because they have access to a range of investments and technical skills, few have actually engaged with a practitioner in the past year and the use of financial planners (19 per cent), full-service stockbrokers (15 per cent), wealth managers (7 per cent) and private banks (5 per cent) has largely remained static.

“The disjoint between the positive views towards advice providers and the current muted uptake of advice highlights how advice providers need to rethink their value proposition and delivery model,” he noted.

“The uncertainties caused by the pandemic has prompted many HNWs to reconsider how they view professional financial advice, which presents a unique opportunity for advice providers to demonstrate their value-add through their technical expertise, guidance and proactive communications.”

The report, which is in its 13th year, is the largest annual study of Australia’s wealthiest investors and examines their advice and product needs, including relationships with private banks, full-service stockbrokers, business banks and fund managers. It is based on a quantitative online survey of 2578 HNW investors conducted in September 2020.

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