How can financial advisers help Australian investors

Provided by ASX

More Australians than ever are becoming investors. That means advisers have an opportunity to serve more customers – provided they can demonstrate value and meet the needs of a younger, more female-skewed investor cohort.

The ASX Australian Investor Study has provided valuable insights into investor behaviour since 1986. This year’s release reveals women and younger people as the growing investor groups, so how should advisers adapt to better serve them?

Who’s investing, and where?

Investment is on the rise, with 1.2 million more Australians investing since the last survey in 2020. Fifty-one percent of adult Australians hold investments outside of their home and super, and 1.33 million Australians plan to start investing within the next 12 months. The median portfolio size of an on-exchange investor has increased from $130,000 in 2020 to $170,000 in 2023.

Shares are still the favourite of on-exchange investments – followed by residential investment property and term deposits. About 15% of investors currently hold a digital currency (cryptocurrency).

While men still make up 58% of investors, half of the 1.2 million investors entering the market after 2020 were women.

Who wants advice?

In the past 12 months, 48% of investors received some form of financial advice from at least one of a variety of professional sources. Just over one-quarter (26%) went through a professional financial planner or adviser. Advised investors hold higher median portfolio balances ($230,000) than non-advised investors ($85,000).

There has been an increase in the proportion of Australians who feel uncomfortable about making investment decisions themselves (35% in 2023 and 31% in 2020).

However, fewer Australians say they use a financial adviser to access a wider range of investments (22% in 2023, down from 27% in 2020). This suggests they’re less inclined or able to seek financial advice to grow or diversify their portfolio.

SMSF investors

SMSF investors are the cohort most interested in getting financial advice, which is not unexpected given their compliance obligations. More than half of SMSF investors received advice in the previous 12 months – with advisers (32%) and accountants (23%) the most popular choice.

High value investors (HVIs)

About 75% of high value investors (HVIs) received some form of professional advice in the past 12 months – 34% from a full-service stockbroker, 33% from a financial adviser and 26% from an accountant. And 13% of HVIs used a robo-advice tool. More HVIs (52%) intend to seek advice in the next 12 months than non-HVIs (31%).

However, this group expressed mixed opinions about the advice they received. While 30% trusted their adviser to make better investment decisions than they would, 30% used external advice as a sounding board for their own ideas. Close to a third shunned advice because they trusted their own abilities more.

HVIs are also willing to pay more for professional advice – a median of $3,000 compared to $570 for non-HVIs. That’s understandable, considering the amount of money at stake in HVI portfolios (a median portfolio size of $1.45 million).

Advice provides value – but many perceive it as too costly

The ASX Australian Investor Study 2023 suggests that investors find value in the advice they receive. Investors receiving advice are more likely to rate their portfolios as diversified than the non-advised (54% versus 36%).

More Australians trust the financial advice profession in 2023 than they did in 2020. But there’s a growing perception that advice is too expensive, with 34% of respondents expressing this view compared to 24% in 2020.

On average, investors said they would pay $1,270 annually to receive financial advice, and fewer than 10% would be willing to pay $3,000 or more for advice.

The future of advice

Over the next 12 months, 29% of Australians plan to seek advice, up from 24% in 2020. Investors with larger portfolios are particularly keen for assistance. This is good news for advice firms that may wish to target high value investors and SMSF owners. Advisers could attract these potential clients with a clear value proposition that shows them the value that advice can provide.

Younger Australians who have never invested are more likely to seek advice from a financial adviser (55% of next generation investors, aged 18-24 years, and 60% of accumulators, aged 25-49 years) versus 39% of retirees (aged 65+ years).

Women who have never invested are more likely to choose professional advice than men (57% versus 43%), with financial advisers the preferred option. This suggests that in the long term, the future client base of advisers will tend to be younger and more skewed towards women.

So how can advisers catch the attention of these investor groups? We know that younger next generation investors (35%) and accumulators (36%) are more likely to be ESG conscious. And more next generation investors are enthusiastic about investing in cryptocurrency than their older counterparts. Advisers who can demonstrate their credentials in these emerging areas may be more likely to attract these younger investors.

Tech-savvy next generation investors are the most likely to use robo-advice tools at some point in the future (20%). Advisers could capture this demographic by offering these clients cheaper digital advice tools initially, and then gradually providing more personalised offerings once they are further along in their investment journey.

Advisers should also keep an eye on the channels where younger investors go to learn about investing. Over half (53%) of next generation Australians turn to YouTube and 35% to other social media platforms for investment advice, so having a presence in these channels could prove valuable to advisers.