The Evolution of High Net Worth Investors
Driving the next phase of modern advice
High net worth (HNW) investors have always been at the forefront of financial innovation, seeking strategies that not only preserve their wealth but also enhance it. With an appetite for new and innovative wealth strategies and experiences, these investors are often early adopters of investment opportunities long before they are embraced by retail investors.
In recent years, we've witnessed a notable shift in their investment approach and demands from a wealth experience. In the latest Praemium/Investment Trends HNW Investor Research this shift is marked by a renewed emphasis on income generation, diversification with an increased allocation to alternative investments, a growing focus on intergenerational wealth transfer, and an increasing prioritisation for a digital advisory experience. We look at the key trends shaping the world of high net worth investing.
Income Generation: Beyond Traditional Avenues
With rising interest rates and rising costs of living, Australia’s HNWs have become more worried about the impact of inflation on their wealth, with 60% stating it as an investment concern. There has also been an increased shift from capital preservation to generating a steady income stream. Consequently HNWs have increased their allocation to cash and term deposits compared to last year.
Diversification: The Key to Risk Mitigation
Diversification has always been a cornerstone of prudent investing, and high net worth individuals are increasingly recognising its importance. Beyond the traditional stock and bond portfolio, UHNWs are turning to alternative investments to spread risk and achieve better risk-adjusted returns, with allocation to this asset class increasing from 11% in 2021 to 15% in 2023. Commodities, private equity, private debt, and structured products have become growing components of diversified portfolios.
Intergenerational Wealth Transfer: A Strategic Imperative
High net worth investors are now placing greater emphasis on intergenerational wealth transfer and are acknowledging it as a key advice need, 24% of HNWs cite intergenerational planning as a key advice. With demographic shifts and changing family dynamics, they recognise the importance of preserving wealth for future generations. Estate planning and tax-efficient strategies are receiving heightened attention. With Australia’s HNWs intending to transfer around 75% of their wealth, trusts, family offices, and SMSFs are being used not only to manage wealth but also to ensure a smooth transfer of assets and values across generations.
Digital Advice Experience: The Future of Wealth Management
The digital revolution has left no sector untouched, and wealth management is no exception. High net worth investors are demanding a seamless digital advice experience that combines technology with human expertise. They are seeking interactive and intuitive tools, real-time insights and personalised investment strategies and reporting. Online platforms are becoming essential tools in adviser’s wealth management arsenal, yet many HNWs are not benefitting fully, still relying on spreadsheets to manage their total wealth. AI is likely to advance the digital experience even more rapidly over the coming years
High net worth investors continue to navigate and shape the ever-evolving wealth landscape. Advisers have a unique opportunity to leverage these insights and deliver an enhanced advice service that helps them to achieve their financial objectives. Those advisers who embrace innovation and adapt to the demands of HNWs will also be well-positioned for the wider investor segment and will benefit from a growing and profitable client base.
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