Evolving the private wealth advice model to support UHNW investors’ needs

Provided by Praemium

Ultra-high-net-worth (UHNW) investors, those with $10m+ in investable assets, face unique challenges and opportunities in today’s financial landscape. Against the backdrop of rising interest rates and cost of living, inflation has become the most cited concern for Australia’s most wealthy investors according to the latest Investment Trends High-Net-Worth Investor Report. This segment is also increasingly focused on achieving a sustainable income stream to maintain their lifestyle. Geopolitical uncertainties, particularly those related to a potential military conflict, China and changes in the White House Administration, have introduced an added layer of complexity to investment decisions. UHNWs are increasingly seeking strategies that can navigate these challenging conditions while preserving and growing their wealth.

Growing need for sophisticated investment strategies

For UHNWs, striking the right balance between risk and return is a paramount consideration. Achieving this equilibrium is not a one-size-fits-all approach; it requires tailored strategies that align with each investor’s unique financial goals, risk tolerance, tax requirements and time horizon.

One notable shift in UHNW asset allocation over the past year has been an increased focus on alternative assets. Private equity, private debt, unlisted infrastructure and structured products have gained prominence as investors seek new opportunities and diversified returns beyond traditional asset classes. This shift reflects UHNWs’ appetite for innovative investment vehicles that can deliver uncorrelated returns and enhance portfolio resilience. Private wealth advisers play a crucial role in helping UHNWs access these opportunities to create diversified portfolios that strike the right balance.

Loyalty driving advocacy

The demand for full-service stockbrokers and private wealth advisers has increased within the UHNW wealth segment over the last year (40% up from 33%), yet the number who have not used an adviser in the last year remains high. A desire for episodic advice or validation of an investment decision continues to be the main driver to seek advice, with a continued and heavy reliance on accountants and lawyers for specialist advice. Yet for those who are using a private wealth adviser they remain loyal advocates, with 57% noting they have used their adviser for more than 10 years and 24% for more than 20 years. This loyalty translates into actual advocacy with 46% recommending their adviser to friends, family or colleagues. This is encouraging, given family and friend referrals are one of the top 3 drivers for adviser selection amongst this group. Couple this with the top two reasons for selecting an adviser; good service and quality advice and private wealth advisers are likely to retain their clients for decades. However, despite this positive perception, there are two significant and growing unmet advice needs.

Wealth transfer: a key opportunity

When questioned as to the areas they would like to be receiving advice but currently aren’t, the report showed a significant increase in the need for advice on inheritance and estate planning (38% citing the need relative to 22% in 2022) and inter-generational advice (24% up from 18% in 2022). With 79% of UHNWs looking to pass on their wealth this is a significant opportunity for advisers to provide guidance and support to their clients and secure the next generation.

The challenge for private wealth advisers is that more than two-thirds of UHNWs perceive their relationship with their private wealth adviser or stockbroker to be transactional. They are more likely to seek advice from an accountant or lawyer on these matters and perceive that a financial adviser would be better placed to provide this holistic financial planning approach. When it comes to discussing the topic of inter-generational planning, 47% of investors with a private wealth adviser said they had discussed the topic already (relative to 58% with a financial adviser) with 31% stating they did not want their private wealth adviser to have the conversation with them (relative to 14% with a financial adviser).

Shifting the traditional private wealth model

The growing need for sophisticated investment opportunities, coupled with a desire for more relationship-based advice support, suggests a shift in the traditional private wealth model is needed. UHNWs are looking for advisers who can provide comprehensive financial planning services including intergenerational wealth strategies, estate and tax planning and portfolio diversification to address both short-term investment goals and long-term wealth preservation strategies. The advisers who can adapt to this changing landscape and offer a broader spectrum of services that encompass both transactional and holistic needs, will continue to be trusted partners in helping UHNWs navigate the complex world of wealth management and are likely to be rewarded with a loyal and supportive client base in return.

For more information on the research, Praemium/Investment Trends HNW Investor Survey 2023, please visit https://praemium.com/advising-the-affluent-australian.

This article is aimed at professional advisers and the content should not be considered as or relied upon as advice.