Wealthy shunning financial advice…

While leaving themselves open to risk!

Having read the following article recently we reflected on our experiences with clients, irrespective of financial capacity or circumstances, who have successfully embraced their Financial Advisor.  The outcome for these clients, as a general observation, has not only been about facilitating informed investment decisions, but more importantly receiving Lead Advice across many aspects of  family life.  Most relationships have resulted in well-constructed and documented wealth ownership and succession strategies which protect and preserve accumulated wealth for themselves, as well as for those they may leave behind….

A new report into the investing habits of high-net-worth individuals has found that the majority do not rely on financial advisers.

The report classified high-net-worth individuals as those with over $1 million in assets outside of super or primary residence and ultra-high-net-worth as those with over $10 million.

The inaugural State of Wealth report by Crestone Wealth Management and CoreData has found that high-net-worth individuals favour their own advice when it comes to investing.

The report found that 20 per cent of individuals did not use any form of financial advice and 50.5 per cent did things themselves and just sought confirmation from either professionals or other information sources.

Only 20.5 per cent of respondents relied on a trusted professional to help them deal with their investments.

This had a flow on effect in not only their portfolio construction but also in the plans they had for the future and in wealth succession.

Simon Hoyle, head of market insight at Coredata, said most of these individuals fell into a category they called coach seekers, those that sought validation.

“More than half of respondents can be classified as coach seekers, they are seeking validation on the decisions they are making but would seek professional help to make those decisions,” he said.

Mr Hoyle said that the single biggest circumstance that would trigger individuals to use a financial adviser was if they found one they could trust.

“The relativity low uptake of financial advisers in this cohort is a surprise but the barriers to taking up advice are around trust. The issue of trust flows through to how individuals seek advice or  whether they perceive value in the services they provide,” he said.

However, it resulted in the cohort having unsophisticated portfolios and left them open to risk, said Mr Hoyle.

“We have a cohort of investors who are poorly diversified and therefore are exposed to a greater level of risk within their portfolios,” he said.

“They are reluctant to seek professional advice and they are not high users of professional advice, which is why they find themselves in the situation they are in.”

Head of strategy and development at Crestone Wealth Management, Clark Morgan, said most of the respondents had very concentrated investments and this exposed them to risk.

“These individuals invest in three asset classes; Australian equity, cash and property, all heavily correlated, very concentrated and Australian domestic equities is a very small subset of global equities where you can get that diversification,” he said.

Eighty-one per cent held cash, while 56.4 per cent held Australian equities and 41.6 per cent held properties, making them the three biggest asset classes by quite a margin.

Mr Morgan said that not only did these individuals need education to construct their portfolios, but would soon need help with the complex task of wealth transfer.

“There are issues, like what to do with succession, do I want to leave a legacy or just leave what’s left over, that the wealthy are aware of but they’re not tackling,” he said.

Source:  Eliot Hastie, Independent Financial Adviser publication – July 25, 2019

…. At Pinnacle, we have been very intent on treating all clients equally and adding value beyond just the investment process.  By understanding our clients’ needs and introducing them to, and guiding them around important matters such as Estate planning, capital/cashflow projections, family trusts, self-managed superannuation, business succession buy/sale agreements between owners, personal risk insurances, superannuation and retirement planning, Age Pension and other Centrelink entitlements, Aged Care issues for older parents, and so on, we achieve our relevance to clients as their trusted Lead Advisor.  In effect, we aim to establish ourselves as a permanent and valuable resource within a clients’ inner circle of trusted professionals – and hopefully be rewarded with a seat on the ‘Family Board’.