Australia’s high-net-worth investors are all dressed up with nowhere to go, as fears of another GFC keep them from investing their billions.
According to Investment Trends’ High Net Worth (HNW) Investor Report, there’s a tidy $100 billion sum “sitting on the sidelines” as Australia’s millionaires struggle to find a worthy place to put it.
While these HNW investors together hold about $290 billion in cash, a third of this is considered “excess cash”.
This money typically would be allocated to growth investments; however “recent market volatility” has fuelled investor reticence.
Senior analyst at Investment Trends, King Loong Choi said: “Almost all HNW investors say they expect to face investment-related challenges in the coming year, and this uncertainty has led to a large build-up of cash holdings.
“Right now, the perceived threat of another global financial crisis and difficulties in investment selection are the two biggest concerns of HNWs.”
Continuing he said that “despite their muted outlook”, half of these investors are looking for material capital growth for their portfolios in the coming year.
He said technology and product manufacturers “play a vital role in assisting HNWs achieve their investment goals”.
The report also revealed that the number of Australian HNW investors has risen for the first time since 2014 to 435,000 individuals with over $1 million in investable assets. To be considered, these assets need to lie outside of their home, business and non-SMSF super.
Reflecting a 2 per cent growth in numbers, this means 10,000 Australian millionaires were minted in the last 12 months.
The HNW investor cohort is estimated to hold $1.7 trillion in investable assets, reflecting a 12 per cent increase in the last 12 months.
According to Mr Choi: "Total investable assets collectively controlled by HNWs reached a five-year high in 2017, and this growth is driven by both an increase in the number of HNW individuals and also existing HNWs becoming wealthier.
"The growth in investable assets controlled by HNWs was led by those in the higher wealth brackets. These investors – who predominantly draw their wealth from business profits, share investments, and property investments – have benefited immensely from the strong performance of both the Australian share market and property market over the last year."
However, as the number of HNW investors grows, their use of financial advisers has fallen. The report revealed that the use of financial advisers among these investors fell to a five-year low in 2017 (68 per cent).
Nevertheless, Investment Trends argued that advice providers still have a "significant opportunity" to build their client base given that 53 per cent of HNW investors said they had unmet advice needs.
“HNWs themselves understand that a single adviser may not necessarily possess the expertise to meet all their advice needs, with only 31 per cent believing it is important that one individual provides an all-encompassing service,” Mr Choi detailed.
“Advice providers could therefore adopt and promote a team-based approach to more effectively service the HNW market.”
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