‘We devote our lives to this’: How advisers bring value to HNW investors

In its new report, Advising Australia’s Affluent, Praemium said 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.

Among the findings in Praemium’s research was that majority (57 per cent) of these 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.

For Chris Morcom, a partner and wealth adviser at Hewison Private Wealth, who works with investors that fall into the HNW bracket, it’s hard to see the advice that the validator investors are getting as anything other than stockbroking or accounting services.

“We’re a full-service firm. It’s a high-risk proposition from our perspective to be giving advice and then not being able to oversee the implementation of that advice,” Mr Morcom said.

“Particularly where there’s potential for people to just even be put into a part of it, and therefore not get the full benefit of that advice.”

In terms of what the HNW investors are looking for, Mr Morcom’s experience broadly lines up with the results of the Praemium research, which found that building an income stream, achieving capital growth, and protecting their assets were among the cohort’s top goals.

“In our experience, our clients want us to help them protect their wealth, grow their wealth, at the same time as funding their cash flow needs, and to be proactive in the provision of advice around the transition of wealth when that time comes,” he said.

Mr Morcom added: “Protection of capital, generally, is a pretty overriding theme that we see with most of our high-net-worth investors. They’ve worked hard, they’ve taken risks throughout their business lives to get to where they are, they don’t necessarily want to lose it or if they’ve inherited it, they feel a sense of obligation to maintain it and protect it. So, it’s a pretty common thing.”

Looking at why these investors, who over their lives have amassed significant wealth, choose to entrust the preservation and growth of that wealth to an adviser, he said that most of his clients recognise the value in utilising the services of a professional that has dedicated their working life to this area.

“Our clients appoint us because they don’t have the time to devote. They recognise they need to have help and assistance in looking after their affairs because they know they don’t have the time nor the inclination, in some cases, to learn sufficiently to do it,” Mr Morcom said.

“We devote our lives to this. This is what we do. This is our whole profession, our livelihood. It’s our business. Most of our clients probably give it a thought every now and then but they’re not thinking about strategies all day, every day. They’re not engaged in a deep way with estate planning strategies and all those sorts of things.”

He added that the way to convert a larger portion of the unadvised or intermittently advised HNW investor population to full-service advice is through a demonstration of the value of advice.

“I think there’s a message for our profession, what we have to think about is how our service is structured best to serve that particular clientele,” Mr Morcom said.

“If the way in which we’ve structured our advice and services doesn’t resonate with those people, then it’s a waste of time trying to chase them and convert them to being full-service clients.

“But if there’s a way you can talk to clients and say, ‘Here’s some stuff that we can do for you on an ongoing basis, and this is the value that it can provide you as a family.’ I think that’s a different conversation.”

Ultimately, Mr Morcom said, it’s about being able to clearly articulate the value an adviser brings to the table.

“If that resonates with people, then that’s how I think it will happen.”