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More wealthy investors, but fewer getting advice as wealth transfer looms

An annual survey of high-net-worth investors shows an increase in the richest Australians over the past year, even as the share of those receiving financial advice has fallen. With the largest intergenerational transfer of wealth in history on the line, a better-aligned approach may be needed.

There are now 635,000 people in Australia with $1 million-plus in investable assets, and they’re about to pass $1.5 trillion on to the next generation. But with this massive wealth transfer looming, fewer high-net-worth (HNW) investors are opting for financial advice, according to a new report.

The 2023 Investment Trends High Net Worth Investor report, sponsored by Praemium, showed that while the number of Australians with investible assets over $1 million increased by 10,000 in the past year, the percentage not receiving financial advice climbed from 60 per cent to 65 per cent.

The results are a likely representation of the market forces affecting the financial advice industry, with the adviser workforce – which has shrunk by about 40 per cent since 2018 – not able to service as many financial advice clients as it has done in the past.

  • The cost to serve for advisers has also risen significantly in recent years due to several factors including higher salary costs, higher professional indemnity premiums and an increasing adviser levy, which has forced advisers to focus on a smaller cohort of higher-paying clients.

    According to Praemium, the reluctance of HNWs to pay for financial advice doesn’t mean they don’t recognise its value.

    “Despite a reticence to seek guidance, HNWs acknowledge a need for advice with inheritance and estate planning, intergenerational advice, and aged care ranking,” the platform provider stated. “The need for advice in these areas is now at its highest in the three years Praemium has been sponsoring this research.”

    Many of the 6,000 investor respondents acknowledged they have unmet advice needs and would pay more to have them addressed. And despite the increase in HNWs not paying for advice, the percentage of those that believe financial advice costs too much fell from 32 per cent to 22 per cent this year.

    Instead, the most common reasons respondents gave for not obtaining financial advice were that they prefer to seek advice only when they need it, can manager their own finances and lack confidence in advisers’ expertise.

    Praemium CEO Anthony Wamstecker said the development could push advisers to change their service offering so it better aligns with client needs.

    “There remains demand for several key advice areas among HNWs – including inheritance and estate planning, strategies to reduce tax, portfolio review, retirement planning and intergenerational advice – but challenges and opportunities remain for advisers, and others in the financial advice industry, to offer services tailored to what investors want,” he said.

    The report examined four wealth segments – $1 million to $2.5 million, $2.5 million to $5 million, $5 million to $20 million and $10 million to $70 million – and found the $2.5 million-to-$5 million cohort grew by 24 per cent, the highest rate. It found those who recently moved up from the $1 million-to-$2.5 million bracket were more likely to be unadvised, with a greater portfolio allocation to direct shares and property.

    The survey also found more HNWs than ever have self-managed super funds (SMSFs), with that percentage increasing as investors get wealthier. Of the $1 million-to-$2.5 million bracket, 56 per cent have SMSFs; that figure rises to 90 per cent at the highest wealth bracket.

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