Unmet advice needs present opportunity for advisers
According to the latest Investment Trends High Net Worth Investor Report 2021, an estimated 376,000 High Net Worth (HNW) investors say they have unmet advice needs, of which only 143,000 are currently advised. Collectively, HNWs say they are prepared to pay $564m to plug those gaps. This is a whopping 16% increase since 2020 and represents a significant advice opportunity. Inheritance and estate planning top the advice needs of investors with over $1m of investable assets (36%), followed by tax optimisation (32%), investment advice (28%), and ESG investing (17%) as the most sought-after areas of advice.
Ultra HNWs (those with $5m to $70m of investable assets) point to intergenerational advice and estate planning as areas where they are not adequately serviced by advisers. This investor segment is particularly concerned about their beneficiaries’ needing financial advice to preserve their future inheritance.
The emerging HNW segment (those with $1m to $2.5m) has the highest percentage of investors stating they had unmet advice needs (60%). The research identified this as the fastest growing HNW segment, with 124,000 newly minted millionaires joining over the last year. The emerging HNW investor was most likely to say they sourced funds for their investment portfolio from an inheritance with 46% stating they had received an inheritance, with another 17% expecting an inheritance.
Nearly all HNWs who have received an inheritance in the past, say they have not used an adviser for assistance. More than half of those expecting an inheritance in the future, say they intend to manage the inheritance themselves and only 8% expect to retain their benefactor’s adviser. The emerging HNW investor was the least likely to retain their benefactor’s adviser of any HNW investor group (4%).
On average, HNW investors expect to leave 68% of their wealth as an inheritance to their family. The proportion of advised HNWs who say they routinely discuss inter-generational planning with their adviser edged up slightly (43% compared to 41% in 2020), but the number of HNWs interested in speaking with their adviser about this topic has grown significantly (30% compared to 23% in 2020). Accountants or lawyers are often top of mind when HNWs (particularly the unadvised) think of obtaining intergenerational advice. Investors currently using a financial adviser (outside of private banking or private client advisory) would mainly turn to this adviser.
When asked what holds them back from seeking financial advice, the main reasons were that they only sought advice when they needed it (33%) and they were happy to manage their finances themselves (32% of respondents in this segment). For the emerging HNW investor, the cost of advice was also deemed as a barrier with just under 30% stating that advisers cost too much or there was a lack of clarity on costs (25%).
With $3 trillion over the next decade set for the largest intergenerational wealth transfer in history, the need for advice on this subject is only going to increase. And with so few retaining their benefactor’s adviser, there is a significant opportunity for advisers to provide support to the current generation and offer education and advice to their future beneficiaries to build a relationship ahead of this wealth transfer. And it’s not just limited to inheritance planning. Strengthening the advice proposition to support the array of unmet advice, including tax and ESG investing, will also help to build client engagement and improve client retention.
For those who don’t currently seek advice, delivering a service that addresses their unmet needs will help to demonstrate the value of advice and open the door to capturing a whole new generation of clients.
Further information
The Investment Trends HNW Investor Research 2021 is based on a quantitative online survey of 2,275 HNW investors conducted by Investment Trends between August and October 2021. HNW investors are defined as those who have at least $1m in investable assets – net wealth clear of debt, excluding own home, business and super (but including SMSF assets).