Advisers halt HNW slide
Tuesday, 16 February 2016 12:55pm

There are signs that advisers have recovered from last year's slide in the number of high net worth investors (HNWs) using their services.

According to a recent Investment Trends survey of around 3000 HNWs with a combined $11.5 billion in investible assets, 42% of respondents use at least one adviser, up from 40% last year.

Advised HNWs are still more likely than their unadvised peers to have unmet advice needs, which puts pressure on advisers to demonstrate value. The 58% of HNWs who do not seek investment advice also represent a largely untapped opportunity open to accountants, financial planners, full-service stockbrokers and private banks.

"Preference for control remains the largest barrier to taking up advice among HNWs, but next comes the question of the adviser's expertise which is central to building perceptions of value," Investment Trends senior analyst Irene Guiamatsia said.

"The onus is on advisers to rethink their approach to service delivery. It is about engaging investors in a way that keeps them at the helm of the decision making process, whilst demonstrating expertise and sophistication."

The number of Australian HNW investors was largely steady over the past year, with an estimated 440,000 individuals controlling investable assets over $1 million as at October 2015, edging down from 445,000 in October 2014.

Investment Trends estimates HNWs' collective wealth now amounts to $1.55 trillion, down very slightly from $1.57 trillion in October 2014.

"The property boom of recent years certainly played a significant role in minting millionaires," said Guiamatsia. "Over 60,000 Australian HNWs indicate the main source of their fortune to be profits made from their property investments, up from 30,000 in 2013."

"Direct shares and property make up two thirds of a typical Australian HNW investor's portfolio. Whilst the property market remained buoyant, the slump in commodity prices and sharemarket volatility throughout the year weighed down on overall asset growth."

Whilst 2012/2013 saw a decisive shift in HNWs embracing growth, bringing their cash reserves from 20% of their collective portfolio down to 17%, very little progress has been made since. As at October 2015, the typical HNW investor held, on average, 16% of their wealth in cash and term deposits.

"HNW investors are keeping a sizeable part of their wealth in the most liquid form at the moment, despite uninspiring cash rates," said Guiamatsia. "Our research indicates this state of affairs could, however, evolve rather quickly under the right circumstances."

HNWs are showing signs of increased 'readiness' to reinvest their cash reserves, relative to a year ago. On average, they deem 42% of their cash reserves to be 'excess', or ready to be invested once the volatility subsides, up from 37% a year ago.

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