Number of high-net-worth investors seeking advice declining

In its new report, Advising Australia’s Affluent, Praemium said that there are now 635,000 HNW investors – defined as having investable assets over $1 million net wealth clear of debt excluding own home, business and super but including SMSF assets – with $2.98 trillion in investable assets.

“As Australia’s affluent continue to grow in number and with a vast wealth transfer underway, more than a third of advisers (36 per cent) are focusing their efforts on growing their high-net-worth investor base,” the report said.

These HNW investors that are unadvised have grown from 331,000 to 368,000 in the current year, however just 94,000 HNWs acknowledged these unmet needs, compared with 104,000 in 2022.

“Strikingly, HNW investors who have unmet advice needs demonstrate a palpable willingness to invest in addressing these gaps,” the report said.

“On average, they express a readiness to pay an average of $2,800 to fill these advisory voids. This signals a growing awareness among unadvised HNW investors about the value of seeking professional advice to navigate complex financial scenarios.”

Despite this willingness to pay for advice, combined with what Praemium called an “upward trajectory” in HNW investors’ attitudes to advice and perception of advisers, there has been a continued decline in the actual use of financial advisers.

In line with this, the report found that 57 per cent of HNW investors identify as validators, or investors that only use advisers to validate their own investment decisions, while there has also been a slight increase in those classifying as self-directed.

“Of those investors who have used an adviser in the last 12 months, all segments cited using an accountant for tax advice as the main source of advice (57 per cent),” the report said.

“Interestingly, the emerging affluent are the most likely to be self-directed (36 per cent) compared to the UHNW (29 per cent) yet were the highest users of financial advisers. Around a quarter of UHNWs use the services of a full-service stockbroker and lawyer.”

Interestingly, due to an increase in the fees being charged for advice, the drop off in client numbers was completely offset. The collective fees that HNW investors paid to advisers is $1.52 billion, marginally up on 2022 and in line with the figures of 2021.

“This shows that although the pool of advised HNW investors may be shrinking, those who remain attached to this advisory model are dedicated and willing to invest in expert guidance,” the report said.

“On average, HNW investors report paying financial advisers more than $8,800 in fees, marking a 30 per cent increase from the preceding year. The median fee paid, which now stands at $4,900, has also risen by 11 per cent since 2022. This trend underscores the perceived value of tailored financial advice, even in the midst of changing dynamics.”

The report added that apprehension about costs as a deterrent for seeking advice has diminished, with just 21 per cent of HNW investors expressing this concern, down from 31 per cent in 2022.

“Episodic advice, which focuses on specific topics or life events, continues to be the preferred mode of engagement for HNW investors, with 39 per cent expressing a steady preference for this approach.”

The area that HNW investors identified as needing the greatest focus is inheritance and estate planning, which was identified by 39 per cent of investors, up from 34 per cent last year. Intergenerational advice has also seen an increase, with 24 per cent of HNW investors identifying this as an area of focus, compared with 20 per cent in 2022.