Advice opportunity as UHNWIs set to spike 27% in Australia
The number of ultra-high-net-worth individuals (UHNWIs) in Australia is expected to swell 27 per cent by 2028, according to Knight Frank’s annual Wealth Report.
UHNWIs are defined as those with a net worth of more than US$30 million, and the firm said it expects the number in Australia to rise from 15,347 to 19,491 individuals by 2028.
The number grew by 2.9 per cent between 2022 and 2023 from 14,922 to 15,347.
Globally, they rose by 4.2 per cent from 601,300 in 2022 to 626,619 in 2023 helped by strong investment performance on the back of the popular “magnificent seven” technology stocks.
However, Australia has fallen from third place to seventh when it comes to assets required to be in the top 1 per cent of wealthiest people. The financial threshold has fallen from US$5.5 million ($8.4 million) to US$4.6 million.
While this was an annual decline, the figure remained significantly higher than the US$2.8 million that was needed in 2021.
New Zealand sat in the succeeding spot with net assets of US$4.5 million, while Singapore had the highest figure in the Asia-Pacific region with a threshold of US$5.2 million.
Knight Frank chief economist, Ben Burston, said: “The improving interest rate outlook, the robust performance of the US economy and a sharp uptick in equity markets helped wealth creation globally over 2023.
“At the end of 2023, there were 4.2 per cent more UHNWIs than a year earlier with nearly 70 very wealthy investors minted every day, taking the global total to just over 626,619.”
Looking at how they spend their money, Australia was highlighted as the most popular location for overseas buyers to buy a property. However, planned changes to taxes for foreign owners could reduce this in the future.
“Fees for foreigners allowed to buy existing houses will be tripled and taxes for foreigners who leave dwellings vacant doubled. Plus January saw the country’s ‘golden visa’ scheme halted.”
Working with HNW clients
When it comes to working with high-net-worth or ultra-high-net-worth individuals, two reports detailed how they differ from the average retail clients.
Research by HUB24 last year found personalised offerings and service quality are the most important criteria for high-net-worth investors when it comes to working with a financial advisers.
The report stated: “While investment management is undoubtedly a core service required by HNW clients, it is likely to be simply one of many utilised in solving their problems. Centering the benefits around investment management to HNW investors is likely to dilute rather than strengthen the advice proposition in the eyes of these clients.
“While they don’t necessarily require more ongoing attention, when they need help from their adviser, they expect responsive service. This has cost and resourcing implications for advice businesses, as it means creating enough capacity to be able to respond as soon as needed – to situations that can be complex.”
Meanwhile, the Capgemini World Wealth Report found they value face-to-face meetings more than digital interactions and are dissatisfied with the digital offerings provided by firms. It also agreed with the HUB24 report that they seek “value-added” services beyond advice to encompass tax planning, inheritance advice, estate management and legal consultation.
Some 43 per cent of the 3,000 affluent respondents surveyed – those with US$250,000–$1 million – said they rely on an independent wealth adviser, rising to 58 per cent in Asia Pacific. But 46 per cent said their wealth manager does not offer value-added services which is stifling their experience, and 82 per cent said they are dissatisfied with their current service provider.
“All of this data describes a wealth band that could benefit from experienced guidance. Therefore, the timing is right for wealth management firms to step in to meet the pent-up needs of the affluent segment.”
AUTHOR
Laura Dew
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