Pandemic drives wealthy investors towards advisers and safe assets

Even Australia’s richest investors looked to break bad financial habits in the wake of the COVID-19 pandemic.

According to Crestone's 2021 State of Wealth Report, the number of high new worth investors with an ongoing relationship with a financial advisers in 2021 has grown to 33.6 per cent from 28.6 per cent the previous year.

Almost a third of high net worth individuals now rely on a professional financial adviser to manage their wealth, with advised individuals significantly more likely to have international equities, sustainable investments, commercial property and Australian bonds.

Crestone head of strategy and development Clark Morgan said that Australia’s high-net-worth (HNW) and ultra high-net-worth (UHNW) individuals looking to invest were paying increased attention to diversification, philanthropy and ESG investing.

“While their top three asset classes have not changed, we have seen a trend towards more diversification,” he said.

According to Mr Morgan, the assumption that HNW and UHNW individuals achieve their wealth by being risk takers is often an inaccurate one.

“While some do have higher risk appetite than others, the majority have remained wealthy by being relatively cautious,” he said.

Overwhelmingly, Mr Morgan said that this class of investors tended to rely on the familiar more than the far-fetched. When it came to the portfolios of the HNW and UHNW investors, there was a strong reliance on cash, Australian equities, and residential property.

That being said, Mr Morgan added that “the majority of HNW and UHNW individuals are willing to deviate from their initial investment plan.”

More broadly, the report indicated an improvement in the financial behaviours of HNW and UHNW investors during the last 12 months.

“The pandemic and increased financial risk may have been the catalyst for many to seek help with their wealth management,” Mr Morgan suggested.

The report revealed an uptick in interest and engagement with professional financial advice among HNW and UHNW individuals.

Beyond that, the report concluded that the big-picture ambitions of wealthy individuals haven’t changed that much in the last two years.

Even if this class of investors is paying more attention to their finances than they did before the pandemic, saving for retirement or providing for one’s family is still the most popular motivation.

However, the report noted that there has been an increase in interest around “doing good” through ventures like philanthropy and ESG investing.

Mr Morgan said that the overall outlook for this class of investors was an optimistic one.

“Intention to invest has risen in every asset class, and that’s due to the combination of optimism and intention to diversify,” he said.

Nevertheless, Mr Morgan urged a degree of caution.

“The pandemic has taught us to be aware of risks. It’s up to individuals and advisers to make sure that the lessons and experience of 2020/21 are not forgotten as soon as the world recovers,” he said.