HNWIs favour advice from IFAs: LGT Crestone

When seeking good financial advice, high-net-worth individuals (HNWIs) say they are most keen to work with independent financial advisers (IFAs) over aligned or super fund advisers.

LGT Crestone’s 2023 State of Wealth report, which surveyed over 1,000 high-net-worth and ultra-high-net-worth individuals (UHNWIs), has found 46 per cent are keen to work with IFAs. 

This is compared to just 20 per cent overall who want to work with a bank-aligned adviser, 18 per cent who want to work with a company that is aligned with a bank or institution, and 10 per cent who want advice from a super fund.

Older HNWIs between 50 and 59 years of age display the most keenness for IFAs (64 per cent), followed by HNWIs over the age of 60 (57 per cent). 

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Those aged over 60 are also most likely to seek advice from a super fund, presumably as they approach their retirement age, at 18 per cent compared to 10 per cent or less for every other demographic.

Looking at advisers who work for a bank or institution, this demand is highest among those aged under 29 at 35 per cent but falls steadily over every demographic after that to reach just 10 per cent of those aged over 60.

The older demographic say they are seeking assistance with their investments and retirement decisions from their adviser, while those aged 29 and below seek help with health insurance and super.

Looking at the financial adviser landscape overall, over half (52 per cent) of HNWIs said they rely on advice or seek information to support their decision-making. 

The report also notes individuals are likely to be referred to an adviser by other professionals, such as lawyers or stockbrokers. 

Compared to LGT Crestone’s last study two years ago, there appeared to be little change in the reliance on wealth professionals, going from 28 per cent in 2021 to 30 per cent in 2023.

The main sources of financial advice for HNWIs are from financial advisers (31 per cent), closely followed by themselves (30 per cent), accountants (18 per cent) and stockbrokers (8 per cent). 

“HNW and UHNW individuals recognise the importance of trusted financial advice, arguably more so in periods of unstable market conditions,” observed Michael Chisholm, LGT Crestone’s chief executive.

“Also given the difficulty in finding information, research and access to alternative and private market investments, the adviser plays a critical role in guiding HNW clients around these decisions. This ‘guiding hand’ principle cannot be understated.”

According to the firm’s research, the top three motivations for investing are retirement, wealth accumulation and supporting family. To achieve these goals, HNWIs are looking for growth and diversification benefits, key drivers of alternative and emerging investments. However, given the lack of research and access, they highly value information and adviser recommendations when navigating these investment decisions.

Chisholm added: “Further, our data shows that HNW and UHNW individuals with a financial adviser experienced higher levels of both engagement and enjoyment as opposed to those who did not have trusted advice. This is a clear articulation of the critical role advice plays not only in effective portfolio management, but investor gratification.”

Interestingly, the report notes that nearly two-thirds of HNWIs do not have a wealth transfer plan in place, despite the majority having intentions to develop one. 

Around 38 per cent of respondents said their top concern is that their wealth might be misused or poorly managed, closely followed by tax implications (37 per cent).

Chisholm noted that a major obstacle for such clients is in figuring out where to begin. 

“The wealth transfer process is one that is deeply personal and unique to each family. We see a significant need for assistance from trusted advice professionals to help introduce the discussion and broaden it to include more family members,” he said.