Philosophically Rich

One of the things separating wealthy Australians from the rest of us, apart from possessing significant assets of course, is the fact the former are relatively unfazed by the financial crisis.

New research on Australia’s high net worth individuals (HNWIs) also reveals that while their investment risk appetite has decreased most of those with financial planners are not blaming their advisers for the losses they have suffered of late.

The research, which covered brandmanagement’s database of more than 1,700 HNWIs (those with more than $750,000 to invest excluding super and their home), revealed very few affluent folk would blame their adviser for losing money.

Risk Appetite Shift Among HNWIs

In a very real posed hypothetical, only 7% of the sample thought they should change their adviser if they suffered a capital loss of 25%.

32% of the sample thought an adviser would not be at all to blame for such a capital loss, while three in five (61%) thought an adviser would be partly to blame.

However for the 27% of the sample that have an adviser – there were some indicators towards potential adviser churn.

Chief among these was the jump in price sensitivity.

In 2006 and 2007 approximately 50% of HNWI advice clients felt their adviser offered good value for money – in 2008 this had dropped to 30%.

It also appears that during the impending plunge into recession, the ability to communicate with customers has been somewhat binary in the industry.

- 41% have received the right amount of communication from their planner

- 40% not enough communication

- 11% no communication

- 8% too much communication from their planner

Some brands performed better than others.

All of the clients, who claimed MLC or Macquarie as their advice group, had either been called, received a letter or an email about the changes in the financial landscape.

As for the others, it was a significantly more hit and miss affair, with some groups having less than 10% of clients stating that they had heard from their adviser at all.

This isn’t necessarily perfectly true – when we contacted some of these groups to ask if they had spoken with their clients – all of them claimed that they had communications programs in place – everything from seminars to emails.

This just reinforces the message that sending a communication has almost no bearing at all on wether or not it has been received.

The research also reveals the important role that brand plays in selling to HNWIs.

For the first time we have been able to build samples of HNWI consumption behaviour that are big enough and detailed enough to conduct conjoint analysis and the interesting news is that brand is critical in the decision making to the bulk of Australia’s rich.

The slightly more interesting news is that many of the brands that you might expect to do well in this space simply don’t.

It seems the Perpetual brand is less important than the St George brand and of the bank brands – NAB is the most powerful and is now performing better than the mighty Macquarie brand.