A growing number of Aussie high-net-worth investors have turned from equities in favour of alternative investments, a survey has found, with confidence falling around domestic stocks and global macro-economic issues.
The findings, as published by market researcher Investment Trends and wealth management platform Powerwraps, have been based on a poll of 3,000 high-net-worth (HNW) Australians, looking at their investment needs, preferences and behaviours, as well as their attitudes towards financial advisers and investment banks.
There are now around 490,000 HNW investors in Australia, with the cohort controlling around $2 trillion in investable assets, according to the 2019 Powerwrap/Investment Trends HNW Investor Report.
The number has grown by 13 per cent since 2017, while their assets have risen by 21 per cent, in aggregate.
Respondents’ expectations around private banks were reported to shift, with declining satisfaction levels.
Recep Peker, research director at Investment Trends said the number of ultra-high-net-worth investors (in the range of more than $10 million) using full-service stockbrokers has halved in the last five or six years.
And while the usage of private banks has stayed steady, satisfaction has been easing for a number of years.
“Perhaps one of the biggest shifts we’ve been seeing overall is that the needs that high-net-worths have isn’t siloed anymore like back in the day,” Mr Peker said.
“So they’re feeling that their needs aren’t necessarily being met, because their needs are no longer just one thing, they need help with a wider range of areas.
“Back in the day, you’d go to a stockbroker if you needed them to transact equities for you. But if you don’t think Aussie equities are going to do well and if your perception of full-service stockbrokers are long only Aussie equities play, that makes them less relevant to the market.”
He added HNW respondents in the survey indicated they expect a broader range of services than was previously the norm, with around 40 per cent of HNW private bank clients saying they would pay for financial planning if it was offered by the banks and 33 per cent of full-service stockbroker customers saying the same.
“The reality is that there is a growing view that private banks, full-service brokers, they need to do more than they’ve just been doing,” Mr Peker said.
“The high networks approach to advice is becoming more and more holistic, they want to help with a wider range of areas. It’s not just investments, it’s not just its structure but it’s kind of the whole thing coming together in unison, that’s what they’re after.”
HNWs abandon equities, eye alternatives
HNW investors have reported as having negative expectations of capital growth for Australian stocks for the second time on record, with most (87 per cent) being concerned with global macro-economic issues.
The other top concerns include the China slowdown (64 per cent), a global share market crash (54 per cent) the White House administration (48 per cent) and share market volatility (42 per cent).
In an uncertain environment, Investment Trends noted, investors are becoming increasingly defensive in their asset allocations, seeking stable and predictable yield.
The report has also pointed to a growing demand for access to alternative assets such as infrastructure funds, private equity funds, unlisted managed funds and hedge funds.
The proportion of HNW investors holding alternative assets now sits at 23 per cent – this is expected to rise to 30 per cent in the next 12 months.
Powerwrap chief executive Will Davidson said the findings were consistent with investment trends among his company’s HNW client base.
“At Powerwrap we have noticed a healthy demand for alternative assets,” Mr Davidson said.
“Many of these investments are not typically available via a platform structure, so we work closely with adviser groups using our platform to ensure we can facilitate access.
“On average 14 per cent of Powerwrap’s HNW investor portfolios are held in this asset class and given the current climate we expect this asset class to represent a significant proportion of portfolios.”
However only one-quarter of all HNW investors indicated they were satisfied with the current range of products available to them on the market.
Sentiment towards financial advisers was noted to have improved, with more HNWs saying they would use an adviser for access to a wider range of investments (29 per cent up from 22 per cent in 2018), for a second opinion (28 per cent, increasing from 24 per cent) and their technical skills (17 per cent, up from 15 per cent).
Still, the report noted the number of HNWs with unmet advice needs has increased (58 per cent, rising from 54 per cent).
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
