Wealthy investors look to advice for improved performance

LGT Crestone has released its 2023 State of Wealth report, which polls Australia’s HNW and ultra-high-net-worth (UHNW) individuals about their investment approach, with the latest edition looking at how they have been impacted by the challenges of the post-pandemic environment.

The HNW group includes investors with $1 million in investable assets, while UHNW indicates a minimum of $10 million.

The fourth annual State of Wealth report found that with a heightened readiness to reallocate investments, data shows that wealthy investors are looking to financial advisers.

LGT Crestone chief executive Michael Chisholm said: “HNW and UHNW individuals recognise the importance of trusted financial advice, arguably more so in periods of unstable market conditions.

“Also given the difficulty finding information, research and access to alternative and private markets investments, the adviser plays a critical role in guiding HNW clients around these decisions. This ‘guiding hand’ principle cannot be understated.

“Further, our data shows that HNW and UHNW individuals with a financial adviser experienced higher levels of both engagement and enjoyment as opposed to those who did not have trusted advice. This is a clear articulation of the critical role advice plays not only in effective portfolio management, but investor gratification.”

Mr Chisholm added the research helps to contextualise patterns of decision making among this cohort of Australian investors.

“It’s no surprise that the macroeconomic and geopolitical forces shaping our world are also shaping the mindsets of Australia’s wealthy, and the research findings deepen our understanding of these shifts and the impact for portfolio strategies,” he said.

“With inflationary pressure and market turbulence top of mind, HNW and UHNW individuals are seeking opportunities for growth by way of diversification, demonstrating a strong appetite for private markets resulting in a broader spread of allocations across asset classes.”

Mr Chisholm said that while equities and cash remain the two largest current investments, with real estate close behind, the proportion dropped in 2023 as HNW Australians “widen their exposure to investments to include emerging markets and various private alternatives”.

The 2023 State of Wealth findings revealed that returns continue to be a dominant driver of decisions, impacting the way HNW and UHNW individuals approach sustainable and philanthropic investments.

“Wealthy individuals are eager to have their personal values – including those related to climate change and societal wellbeing – expressed in the way they are investing,” Mr Chisholm said.

“Yet in the face of uncertain economic conditions, returns are the predominant driver of choice for this type of investing. One of our priorities is addressing this myth that you need to sacrifice returns to invest sustainably.

“We’re seeing that HNWIs who identify financial advisers as their primary source of advice are more likely to actively seek sustainable investments, reflecting the strong role advisers play in helping individuals identify and invest in this space in a way that works for them.”

According to the report, despite the majority having intentions to develop a wealth transfer plan, nearly two-thirds of HNW individuals do not have one in place.

“Despite its importance, it is evident that developing a clear plan remains a huge challenge for wealthy Australians. Even for the many individuals who recognise the need for a transfer strategy, the obstacle is simply where to begin,” Mr Chisholm said.

“The wealth transfer process is one that is deeply personal and unique to each family. We see a significant need for assistance from trusted advice professionals to help introduce the discussion and broaden it to include more family members.”

Mr Chisholm concluded: “A new world order rising out of COVID-19 pandemic warrants professional financial advice more than ever, particularly in the areas of asset allocation, family wealth advisory, and philanthropy.”