Wealth transfer presents opening for advisers to connect to affluent clients

According to the 2023 Investment Trends High Net Worth Investor Report, the Australian wealth management landscape is evolving with the number of affluent investors increasing over the last year to 635,000 investors, with $2.98 trillion in investable assets.

Of the four wealth segments examined by the report, the $2.5–5 million segment saw the most significant growth in the past 12 months, with the number of people in this segment growing by 24 per cent.

It is these new graduates that are more likely to be unadvised investors which, according to the report, creates a “striking opportunity” for advice providers to cater to this growing and lucrative investor segment.

Statistics from the report show that an SMSF is a preferred vehicle for growing and transferring wealth among the more affluent.

“More [wealthy Australians] than ever have self-managed super funds, and the wealthier they are, the greater that percentage,” the report stated.

Namely, SMSFs are held by 56 per cent of the emerging affluent ($1 million–$2.5 million), 69 per cent of the established affluent ($2.5 million–$5 million), 77 per cent of HNW ($5 million–$10 million), and 90 per cent of ultra-high net worth (UHNW).

The average age of Australia’s affluent is 65 years, and a sizeable portion (50 per cent or more in each bracket) are not retired, with the average time to retirement for non-retired HNWs being nine years.

Interestingly, the report found that high-net-worth investors have expressed a consistent and growing need for advice to help support the transfer of wealth.

“They recognise the importance of legacy planning, with 95 per cent expressing their intention to leave an inheritance,” the report noted.

Namely, the anticipated wealth transfer is significant with HNW investors expected to bequeath over $1.5 trillion of assets to their family beneficiaries.

The report also looked into the timing of planned wealth transfers, with a quarter of HNW investors (25 per cent) noting they have already initiated this process. This rises to 52 per cent UHNW, while 31 per cent plan to initiate the transfer upon their passing. Additionally, 11 per cent of HNW investors intend to embark on a wealth transfer within the next five years, which amounts to a cumulative $197 billion.

Moreover, SMSFs are the prevailing structures that come to mind for HNW investors considering a wealth transfer, with 33 per cent either currently using or intending to use them for this purpose.

While individuals who have begun the wealth transfer process appear to have a diminished requirement for estate planning (59 per cent compared to the overall figure of 62 per cent), the report said that they recognise the importance of enhancing the financial literacy of their beneficiaries.

“Established HNW investors, while more experienced, still face the challenges of managing their wealth as their financial situations evolve,” the report said.

“Their focus on income generation underscores the importance of crafting investment strategies that align with this priority.”

Furthermore, a greater number of those who have started the process (8 per cent) express interest in actively engaging their entire family in the advisory process, as opposed to the overall figure of 6 per cent.

The report also noted that the unadvised affluent investor stand out as a focal point for advisers.

“As these individuals enter higher wealth brackets, they often lack the comprehensive financial education and professional guidance needed to navigate the complexities of their newfound wealth.

“This presents an opening for advisers to connect with this demographic, understanding their unique challenges and tailor fitting their services to bridge the advice gap and provide a solid foundation in wealth management strategies, setting the stage for long-term success.”