Invest
Australia’s richest are ‘risk-averse risk-takers’
Australia’s high-net-worth and ultra-high-net-worth individuals are highly cautious and “not that sophisticated” as investors, putting their portfolios at greater risk, a new survey has found.
Australia’s richest are ‘risk-averse risk-takers’
Australia’s high-net-worth and ultra-high-net-worth individuals are highly cautious and “not that sophisticated” as investors, putting their portfolios at greater risk, a new survey has found.
Crestone Wealth Management undertook a poll of high-net-worth and ultra-high-net-worth individuals to “better understand the drivers and behaviours behind the investment profiles of the nation’s wealthy”.
High-net-worth investors are those with $1 million in investable assets, while ultra-high-net-worth individuals were considered as holding more than $10 million in investable assets.
The research revealed “a high degree of investment caution amongst the cohort”, particularly in respect of asset allocation.
Among high-net-worth and ultra-high-net-worth investors, a tendency was noted for individuals to concentrate wealth in only three asset classes: cash, Australian equities and residential property.
The report also showed that “less than 25 per cent of the segment actually have an ongoing relationship with a financial adviser”, as highlighted by Crestone’s head of strategy, Clark Morgan.
Calling such a low figure surprising, Mr Morgan considered that a lot of Australian high-net-worth and ultra-high-net-worth individuals don’t trust advice, or don’t see the value in it.
Yet another reason why high-net-worth investors may not use such services is that “some of them just think they are better than the world’s leading fund managers”, the strategist commented.
With the report noting that a lack of investment diversification can expose high-net-wealth and ultra-high-net-wealth individuals to downside risk, it said a majority of the cohort would describe themselves as cautious and unwilling to tolerate more than moderate losses on their investments.
“We call it the wealth paradox,” Mr Morgan stated, calling out the sophistication of those falling under the umbrella of high and ultra-high-net-worth classification.
“No, they are not that sophisticated,” he said, commenting that to measure someone’s sophistication by the amount of wealth they accumulate is “insane”.
“Many of these investors are inherently cautious, but due to their lack of diversification, they are increasing the risk profile of their portfolios significantly,” he continued.
“They are risk-averse risk-takers.”
Considering an example of a woman with eight properties but no money, Mr Morgan said “she’s not a sophisticated investor by any shot – but she would be classified as one based on her assets".
The strategist went on to emphasise that high-net-worth and ultra-high-net-worth individuals “need education on how to better manage their portfolios, including developing optimal investment strategies, managing the efficient transfer of wealth to younger generations, and diversifying into non-traditional investments and asset classes”.
This email address is being protected from spambots. You need JavaScript enabled to view it.
About the author
About the author
Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more
Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more
Stock market
Facebook debuts new name
Zuck gets meta. ...Read more
Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more
Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more
Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more
Stock market
The 6 unique Australian market affects that all active managers can exploit
The uniqueness of the Australian equities market is providing fund managers with an opportunity to essentially beat the market, new research has revealed. ...Read more
Stock market
‘Don’t believe the hype’: ASIC warns of risks for new market participants
ASIC has expressed concern that inexperienced or uninformed investors are putting their capital at unnecessary risk when tempted into the market by questionable marketing strategies from market promot...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more
Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more
Stock market
Facebook debuts new name
Zuck gets meta. ...Read more
Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more
Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more
Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more
Stock market
The 6 unique Australian market affects that all active managers can exploit
The uniqueness of the Australian equities market is providing fund managers with an opportunity to essentially beat the market, new research has revealed. ...Read more
Stock market
‘Don’t believe the hype’: ASIC warns of risks for new market participants
ASIC has expressed concern that inexperienced or uninformed investors are putting their capital at unnecessary risk when tempted into the market by questionable marketing strategies from market promot...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
