How the richest Australians are using financial advice

In 2022, platform provider Praemium commissioned Investment Trends to delve into the high-net-worth (HNW) market. The findings from that research found that the past the use of professional investment advisers among HNWs declined in 2022, with 60 per cent not seeking advice at all.

In 2021, a mere 17 per cent of HNWs used a financial adviser as their main source of investment advice. That fell to 15 per cent in 2022.

The way in which HNWs are engaging with advisers is very different to traditional retail investors.

The Investment Trends research found that with 60 per cent of HNWs identifying as a validator, these individuals would prefer to only seek advice to access certain investments, for technical advice or for a second opinion on their own investment decisions. A mere 9 per cent would prefer to use an adviser to make all investment decisions.

A number of advisers who specialise in HNW clients told ifa that it is very common for ultra-wealthy investors to have multiple advisers, rather than one adviser or firm handling all of their wealth. A common approach is for an adviser to be given a mandate or portion of the wealth to manage, such as $5 million from a total portfolio of $200 million.

Sayers partner and head of advice Jason Chequer says the skillset required to work with HNWs is very different to retail investors.

“There is an investment orientation, so the investment capability and expertise needs to be far greater,” he said.  

“However, just because you have wealth doesn’t mean you’re sophisticated. So you need to be able to educate and inform HNW clients so they can make decisions. It is not about product orientation. It is not an APL approach.”

Mr Chequer suggests the traditional retail advice model in Australia has been too inflexible for most HNW investors.

“There is still dissatisfaction among HNWs towards the wealth industry because advice is still being provided in a way that works for the adviser but not for the client,” he said.

“The HNWs are moving beyond the preservation and growth of capital. They are looking for unique and alternative asset classes. They are struggling to find advisers who will advise them outside of their remit, which is the traditional portfolio.”