Jumping Ship

If there ever was a love affair between Australia’s wealthy and the financial planning industry, the signs are that it may well be over.

For the past five years, CoreData has conducted a survey of the buying relationships, habits and desires of high net worth Australians – those with more than $1 million in investable assets outside their property and superannuation assets.

Our latest research reveals that the number agreeing with the statement “I used to have a financial planner but not any more” has effectively doubled in the past 12 months.

This jump reflects the experiences of Australia’s HNWI during the global financial crisis.

There were clearly a group of advisers who managed the global financial crisis and their relationships very well, but that appears to have been a minority.

Despite the demonstrated need for advice in the HNWI segment, the vast bulk of advisers were unable to demonstrate the value of what they offered in terms of advice, planning, activity and communication.

This is evidenced in wealthy Australians’ understanding of what caused the collapse in world share markets. They didn’t necessarily blame their planner for the fall in their net worth – it’s just that the concept of utility has changed dramatically.

Only 17% of the HNWI that participated in CoreData’s latest research think their planner was in any way responsible for their capital losses.

When you compare that to the mass affluent sample (Australians with between $250,001 and less than $1 million in assets), 28% apportion blame to their planner, so it’s clear that some other force was at work in the decision of HNWI to abandon their planner.

The GFC has forced into focus the role that advisers play in their client’s lives.

It’s very clear that the old role of providing value through ease of investing, basic planning, access to products and services has gone. HNWI now think that they can provide this service for themselves – the new utility for this client base is: what do you do and how much do you charge for it?

The growth in the concept of price as utility for Australia’s HNWI is also having a noticeable effect on their superannuation decisions.

The latest research reveals the message of industry super funds is resonating with the wealthy and leading to an increasing interest in and investment in Industry Super.

Having abandoned the idea that advice can add value, many HNWI are looking for what they perceive as the cheapest option to provide generic services – and they are finding that in Industry Super.

One of the most strongly correlated things with wealth in Australia is owning all or part of a business, so a lot of these people are exposed on a regular basis to the performance, cost advantages and reporting of the industry funds.

*Data sourced from CoreData’s 2010 HNWI Report