Australia Wealth Management: HNW Investors 2019

Australian HNW investors – who tend heavily towards professional and entrepreneurial males – show moderate demand for most forms of wealth advice and planning. A multi-service proposition underpinned by a proven ability to demonstrate returns will be key to tapping into demand as there is lukewarm interest in discretionary mandates at present. A burgeoning appetite for novel options such as robo-advice, the upcoming transfer of wealth between generations, socially responsible investment (SRI), and the growing female segment provide arguably the most significant growth opportunities for Australian wealth managers in the foreseeable future.

This report sizes the opportunity offered by Australia's wealth market. It analyzes the investment preferences, service requirements, and portfolio allocations of Australian HNW investors. The report is based on our proprietary Global Wealth Managers Survey.

Scope

– 49% of male HNW investors are older than 60, compared to 42% of female investors. This suggests spousal inheritance will increase the role of women in the market modestly over the next 10 years.

– Only 10.5% of HNW individuals in Australia are expats, but providers that understand the distinct needs of this lucrative segment will be able to achieve higher margins.

– Australian HNW individuals use an average of 6.1 wealth managers and invest less than a fifth of their managed wealth with their main wealth manager.

– HNW individuals in Australia invest an average of 24.4% of their total managed wealth offshore.

Reasons to buy

– Develop and enhance your client targeting strategies using our data on HNW profiles and sources of wealth.

– Give your marketing strategies the edge required and capture new clients using insights from our data on HNW investors’ preferences for the various styles of asset management.

– Tailor your investment product portfolio to match current and future demand for different asset classes among HNW individuals.

– Develop your service proposition to match the product and service demand expressed by Australian HNW investors and react proactively to forecasted changes in demand.

Companies mentioned

Commonwealth Bank of Australia

Macquarie Bank

ANZ

National Australia Bank

Westpac

Table of Contents

Table of Contents

1. EXECUTIVE SUMMARY

1.1. Already a mature wealth market, Australia still offers room for growth

1.2. Key findings

1.3. Critical success factors

2. SIZING AND FORECAST

2.1. The proportion of HNW investors is forecast to stay relatively static

2.2. Almost half of Australia’s liquid assets are concentrated among HNW individuals

3. DEMOGRAPHICS

3.1. HNW entrepreneurs are lucrative but employees offer volume too

3.1.1. Many HNW individuals have reached or are approaching retirement age

3.1.2. Earned income accounts for a greater share of HNW wealth than entrepreneurship

3.2. Australian wealth remains diversified, with the mining sector down from previous highs

4. HNW EXPATS

4.1. Expats are a below-average but growing segment of the HNW market

4.1.1. Expats constitute

10.5% of the local HNW market, which is modest compared to other high immigration nations in Asia

4.1.2. HNW expats from the UK and China represent attractive target segments

4.1.3. Intergenerational opportunities and lifestyle factors are big drivers for expats, although business opportunity remains key

4.1.4. The SIV is a lucrative but small market

5. HNW INVESTMENT STYLE PREFERENCES

5.1. The expectation of life events and access to more sophisticated products drive uptake of advice

5.1.1. Wealth managers need to highlight how products help address life goals or milestones

5.1.2. Australian HNW investors spread their wealth across

6.1 wealth managers

5.1.3. Australian HNW wealth is relatively balanced across asset management styles

5.1.4. A sophisticated proposition is important to attract HNW investors, but low-cost options are experiencing growing demand

5.2. Automated investment and execution-only services offer opportunities for traditional wealth managers

5.2.1. The strongest growth in demand will be for advisory asset management

5.2.2. HNW investors self-direct primarily due to confidence in their own abilities

6. HNW ASSET ALLOCATION PREFERENCES

6.1. A desire for further diversification will drive uptake of alternatives among HNW investors

6.1.1. Equities have reduced considerably, in line with global trends

6.1.2. Roughly half of HNW assets are held via funds and ETFs

6.1.3. Equity will bounce back from its recent lows in the asset mix

6.1.4. Investment is driven by expected higher income or risk aversion

7. OFFSHORE INVESTMENT DRIVERS AND MOTIVATORS

7.1. HNW offshore holdings are well below average for the wider region

7.1.1. Increasing use of offshore booking centers is a strategic threat to local wealth managers

7.1.2. Australians use offshore booking centers that are also the world’s largest financial markets

7.2. The aim for better returns offshore is linked to diversification

7.2.1. Foreign stock markets attract the bulk of Australian offshore investment

8. HNW PRODUCT AND SERVICE DEMAND

8.1. HNW investors show strong demand for all advice and planning services, but tax planning is particularly sought after

8.1.1. Inheritance planning needs to be a core element of Australian wealth managers’ propositions – especially when reaching out to the country’s sizable entrepreneur community

8.1.2. Life insurance represents a growing opportunity, but demand is currently low

8.2. Steady market growth will drive demand for most auxiliary services

8.2.1. Demand for life insurance is likely to rise from current lows

8.2.2. Offering SRI will become more important as the next generation takes over

8.2.3. Expanding credit facilities is expected to see the lowest increase in demand

9. APPENDIX

9.1. Abbreviations and acronyms

9.2. Definitions

9.2.1. Affluent

9.2.2. HNW

9.2.3. Liquid assets

9.3. Methodology

9.3.1. GlobalData’s 2019 Global Wealth Managers Survey

9.3.2. Level of agreement calculation

9.3.3. Service level of demand score

9.3.4. Forecast level of demand calculation

9.4. Secondary sources

9.5. Further reading

List of Figures

List of Figures

Figure 1: The number of affluent individuals will grow at a steady rate over the forecast period

Figure 2: Australian affluence will rise at a slower rate in the future

Figure 3: Older men represent the bulk of the market, but the younger age profile of female HNW individuals ensures a growing role

Figure 4: HNW individuals mainly derive their wealth from earned income and entrepreneurship

Figure 5: Basic materials and financial services have helped drive the current generation of HNW investors

Figure 6: Expats represent a below-average proportion of the Australian HNW population

Figure 7: HNW expats are drawn to Australia for its stability and business opportunities

Figure 8: Life events and access to more sophisticated investments drive demand for professional advice

Figure 9: Australian HNW individuals use more wealth managers than the regional average

Figure 10: Australian HNW wealth is evenly distributed across various mandates

Figure 11: The merits of discretionary asset management need to be sold to Australian HNW investors

Figure 12: Demand for advisory asset management is expected to surge over the next 12 months

Figure 13: HNW individuals self-direct due to their own confidence and to avoid management fees

Figure 14: Australian HNW individuals have a remarkably balanced asset allocation spread

Figure 15: ETFs make up almost a fifth of the HNW investor portfolio

Figure 16: Equities will experience the highest net increase in demand

Figure 17: Asset diversification, returns, and inflation protection benefits strongly affect asset allocation preferences

Figure 18: Australian HNW offshore holdings are below the regional average but will surge

Figure 19: Australian HNW individuals invest in the usual range of global and regional offshore markets

Figure 20: Offshore booking centers are seen to offer superior returns and diversification to HNW Australians

Figure 21: Equities are the main attraction for HNW investors offshoring their wealth

Figure 22: Demand is most pronounced for tax planning

Figure 23: Strong opportunities exist for more diversified product offerings

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