Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 192

HNW asset allocation and advice trends

In an advanced look at the results, the 2016 Investment Trends High Net Worth (HNW) Investor Report updates research on the use of advisers and the latest asset allocations.

The study is based on 2,500 responses from HNWs with investible assets (excluding super in public funds but including SMSF balances) of over $1 million, net of debt. This group is estimated to control about $9 billion of the $1.5 trillion held by all HNWs in Australia.

Some highlights include:

1. The number of HNWs in Australia fell to 425,000 in 2016 from 440,000 in 2015, partly due to market conditions and partly because of using debt to invest in property. The number with $2.5 million and above is growing.

2. The main investment problem identified by half the respondents is they are seeking growth in their portfolios but don’t expect it will come from Australian shares in 2017 (their return expectations have recovered somewhat since bottoming in September 2016, but they are still bearish). They know they should not allocate significantly to cash.

3. As expected in such uncertain times, there is an increasing unmet need for advice. Says Recep III Peker, Research Director at Investment Trends, “Over half of HNWs have large unmet needs for advice. In spite of this, they are increasingly reticent to seek advice, and the use of advisers is falling. Financial planners and full service stock brokers are losing ground, especially for investment advice.”

The changes for full service stockbrokers are particularly challenging. Those who have retained clients have a more holistic relationship, including in asset classes other than equities. But only 40% will actually call themselves a stockbroker, with most preferring names such as ‘wealth managers’, signifying a more diversified offering. They have not become ‘financial planners’, but their businesses are changing. For example, they commonly sell global ETFs to give their clients an international equity exposure.

4. Asset allocation has not changed significantly in last few years. The top-level asset distribution is 32% direct shares, 32% property, 16% cash and TDs and the rest in listed or unlisted managed funds and alternatives. Geographically, the proportion of assets overseas averages only 5%, although for the wealthy with assets $10m+, it is a much higher 10%.

Uncertain times and stretched market values seem to have paralysed reallocation. The amount in cash and TDs has fallen slightly by 1% to 16% in the last two years, despite uncertainty in the share market, due to low rates. HNWs in Australia are estimated to be holding $240 billion in cash, with $100 billion temporarily waiting for better market conditions.

The proportion of HNWs planning to invest in managed funds remained at 20% in 2016. About half of these HNWs want actively managed international equity funds, and two in five seek active Australian equity funds. Says Peker, “It’s been a bit of a missed opportunity that the industry has not grown its share of the HNW pie, but there is still good appetite for managed funds.”

The number of HNWs who have direct property has increased but average holding size has come down, perhaps indicating property is held in an SMSF.

 

Graham Hand is Managing Editor of Cuffelinks and this preliminary release is courtesy of Investment Trends.

7 Comments
Andrew Varlamos
March 14, 2017

Thanks Graham. How do you interpret the first graph: specifically, who are the "advisers" who are not giving investment advice? Accountants? Or insurance agents/advisers? Does the study explain this?
Cheers
Andrew

Graham
March 14, 2017

Hi Andrew. Recep has provided this clarification: The main driver of the gap between the two metrics are accountants for tax advice, who were used by nearly half of HNWs in 2016. Even accountants have lost ground over the past few years, with the share of relationships falling from 56% in 2013 to 48% in 2016.

Andrew Varlamos
March 14, 2017

Thanks Graham

Roger
March 03, 2017

Thanks for the article, Graham. Interesting that your bar charts have no segment for 'bonds - listed plus unlisted'. I understand the allocation is indeed low - far too low, according to many standards.

VeryAverageJoe
March 02, 2017

Hi Graham, fair call. My bad. Cheers, C.

VeryAverageJoe
March 02, 2017

Graham, hi, interested you cherry-picked one quote from Uncle Warren's annual missive without mentioned the shellaking he gave the funds management trade for their collective results v low cost index thumping given over his 10 year comparison bet. Don't ask the barber if you need a haircut, right?! Reader's might like to start at page 21 of the recent Berkshire 2016 letter (google it) while I keep reading Where are All the Customer's Yachts? Funds management has it's place and purpose no doubt, but the lofty heights may not always be that place. Cheers matey, C.

Graham Hand
March 02, 2017

Hi VAJ, not sure a 'cherry pick' is fair when I simply quoted one optimistic line from Buffett that had nothing to do with funds management. Cuffelinks has published many articles on the index v active debate, showing how most active managers struggle to outperform. Not defending it, but his comparison bet was against a basket of hedge funds, where the fees are higher than the 'average' long-only manager. Certainly, indexing has a role in many portfolios.

 

Leave a Comment:

RELATED ARTICLES

Five charts show predicaments facing financial advice

Now you can earn 5% on bonds but stay with quality

Reducing the $5,300 upfront cost of financial advice

banner

Most viewed in recent weeks

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

The 2025 Australian Federal election – implications for investors

With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Latest Updates

Investment strategies

4 ways to take advantage of the market turmoil

Every crisis throws up opportunities. Here are ideas to capitalise on this one, including ‘overbalancing’ your portfolio in stocks, buying heavily discounted LICs, and cherry picking bombed out sectors like oil and gas.

Shares

Why the ASX needs dual-class shares

The ASX is exploring the introduction of dual class share structures for listed companies. Opposition is building to the plan but the ASX should ignore the naysayers and bring Australia into line with its global peers.

The state of women's wealth in Australia

New research shows the average Australian woman has $428,000 in net wealth, 40% less than the average man. This takes a deep dive into what the gender wealth gap looks like across different life stages.

Investing

The two most dangerous words in investing

Market extremes are where the biggest investment risks and opportunities lie. While events like this are usually only obvious in hindsight, learning to watch out for these two words can alert you to them in real time.

Shares

Investing in the backbone of the digital age

Semiconductors are used to make microchips and are essential to a vast range of technology and devices. This looks at what’s driving demand for chips, how the industry is evolving, and favoured stocks to play the theme.

Gold

Why gold’s record highs in 2025 differ from prior peaks

Gold prices hit new recent highs, driven by a stronger euro, tariff concerns, and steady ETF buying – all while the precious metal’s fundamental backdrop remains solid amid a shifting global economic landscape.

Now might be the best time to switch out of bank hybrids

In this interview, Schroders' Helen Mason discusses investing in corporate and financial credit securities, market impacts of tariffs, opportunities for cash investments, and views on tier two and hybrid bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.