Wealth Management in Australia 2009

Published by: Datamonitor

Published: Aug. 14, 2009

Table of Contents

Overview

Catalyst

Summary

Methodology

Executive Summary

The wealth of Australian investors suffered at the hands of the global financial crisis

HNWs have become more defensive, but equities still represent an important asset for the future

Wealth managers are expected to invest resources into equities in the future, while financial stability has become particularly important for clients in the downturn

Table of Contents

Table of Figures

Table of Tables

Australia's Wealth

After years of solid growth, the wealth of Australian investors was impacted by the global financial crisis

The Australian labor market started struggling in 2008

Conditions for business owners weakened, making it harder to generate wealth

Events in the global economy sparked selling pressure in the local stock market

Property prices in Australia declined after staging a small recovery in the lead up to 2008

Australian investors continued to pulled money out of equities

A flight to safety from household investors saw deposits become heavily favored in 2008

The wealth data in 2009

The Australian HNW Investor

Australian HNWs have become more defensive in 2009, but they remain more risk-seeking than the Asia Pacific average

Equities represent an important asset class for Australian HNWs

Wealth management service implication: provide clients with regular market commentary and offer forward-looking opinions on the Australian and offshore equity markets

Innovative example from Australia: Commonwealth Bank provides clients with regular market updates and has a strong presence in the media

Over the next two years, equities and deposits will remain the most important asset classes for HNWs

Wealth management service implication: help investors position for the equities recovery while limiting risk

Innovative example from Australia: Macquarie has a capital-protected geared equity investment product

Australian HNWs have superior knowledge of investments and are more demanding towards their wealth managers

HNWs exhibit higher-than-average knowledge of products and market conditions

Wealth management service implication: providers should be focused on furthering the education levels of their clients

Innovative example from Switzerland: UBS is investing resources in its clients

Australian HNWs are demanding when it comes to their wealth management service

Wealth management service implication: wealth managers need to increase contact with their clients in their time of need

The global downturn has shifted the demands of Australian investors

Due to uncertainty in the markets, the majority of HNWs want investments that they can easily understand

Wealth management service implication: focus on understanding the client better and catering to their needs

Innovative example from the US: ClientFirst Wealth Management is for the client

The Australian Wealth Manager's View

Over the next two years, HNWs will be demanding direct equities and, as a result, wealth managers are planning to focus most of their resources on this area

The majority of HNW clients will be demanding direct equities over the next two years

Wealth managers expect to focus their resources on direct equity investments over the next two year

While personal relationships are still key in HNWs choice of wealth managers, they are focusing much more on the financial stability of providers

Financial stability is very important to HNWs in Australia

Australian wealth managers see personal relationships as their biggest strengths and investment performance as their biggest weaknesses

Increasing face-to-face contact, better leverage of CRM and convincing clients that the firm is financially sound are important factors for increasing share of wallet

Financial stability has emerged as an important attribute this year for wealth managers to possess

Australian wealth managers are contacting their clients more frequently than their Asia Pacific counterparts

Australian wealth managers contact their clients over the phone more frequently than the Asia Pacific average

Australian wealth managers are slightly ahead of their Asia Pacific counterparts at getting in front of their clients

The performance of individual asset classes and the investment opportunities of today are what HNWs most want to talk about when they speak to their wealth manager

Appendix

The drivers of growth in the wealthy population

Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels)

Investment returns (market capitalization, interest rates and bond yields)

The following measures are not, in themselves, drivers of wealthy population growth

Market capitalization

GDP

The following measures are not drivers of wealthy population growth except under very restricted circumstances

Primary residence value growth

Inheritance

Methodology

Wealth Management Market Leaders Survey 2009

Global Wealth Model

The UK sub-model

Global sub model (for all other countries)

Forecasting methodology

Continuous refinement to the understanding of liquid wealth distribution

Datamonitor's wealth numbers compared with other wealth numbers

Bibliography

Definitions

Asia Pacific

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: What proportion of your HNWs' portfolios is allocated to the following five asset classes?

Table 2: HNWs portfolio allocation by product area now and in two years' time

Table 3: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)

Table 4: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)

Table 5: What are HNWs demanding today?

Table 6: Over the next two years, how much demand do you expect from HNWs for the following product areas?

Table 7: What product areas will your wealth management service focus most resources on over the next two years?

Table 8: What will determine HNWs' choice of wealth management service over the next two years?

Table 9: What are your company's biggest strengths and weaknesses today?

Table 10: What is the most effective means of increasing share of wallet today?

Table 11: On average, how often do your relationship managers speak by phone to each HNW client?

Table 12: On average, how often do your relationship managers speak in person to each HNW client?

Table 13: When speaking with clients, what do they most want to talk about today?

List of Figures

Figure 1: In 2008, the Australian labor market was hit by higher unemployment and lower average wages

Figure 2: The global financial crisis had a dampening effect on business conditions and confidence in 2008

Figure 3: Like most developed economies in the Asia Pacific region, Australia's stock market declined sharply in 2008

Figure 4: After a small surge in home prices between 2005 and 2007, prices declined in 2008

Figure 5: Australian investors adopted a defensive attitude towards investing in 2007 and 2008

Figure 6: The majority of Australian HNW wealth is invested in equities, with this accounting for 26% of all investments

Figure 7: By 2011, the majority of HNW assets in Australia will be invested in equities, with this accounting for a quarter of all investments

Figure 8: HNW investors in Australia have greater product knowledge than the average Asia Pacific HNW investor

Figure 9: Personal relationships and personal contact are still paramount in retaining HNWs

Figure 10: In Australia, HNW investors' greatest demand is for simple, transparent investments

Figure 11: Over the next two years, the greatest need among HNW investors in Australia will be for direct equity investment, with 92% of HNW investors demanding this category of product

Figure 12: Wealth managers in Australia will be focusing most of their resources on direct equity investment over the next two years

Figure 13: HNW investors in Australia will be most influenced by a provider's personal relationships with its clients when choosing a wealth manager over the next two years

Figure 14: The greatest strength of wealth managers in Australia is their personal relationships with clients

Figure 15: The best way for wealth managers in Australia to increase share of wallet is to increase face-to-face contact with their clients

Figure 16: In Australia, most relationship managers speak to clients by phone approximately once a week

Figure 17: Relationship managers speak to clients in person between once a month and once a quarter

Figure 18: The majority of clients in Australia want to speak to their wealth manager about the performance of specific asset classes within their portfolio

Abstract

Introduction

The global economic crisis has had a major effect on Australia's onshore wealthy population, potentially causing them to lose faith in their wealth managers. To keep clients, wealth managers need to know what this lucrative customer wants from them, in terms of products, services and interaction.

Scope

• HNW demographic and attitudinal attributes based on our Wealth Management Market Leaders Survey 2009
• Extensive primary research from 16 wealth management companies highlights their strategies for revenue growth, acquiring and keeping clients

• Australian HNWs are displaying typically defensive behavior in the face of the economic instability, and have lifted their proportion of assets held in cash in 2009. Despite this, equities still accounted for the largest share of average portfolios.
• Clients place great importance on their personal relationship with their wealth manager, and Datamonitor recommends that providers should be increasing their client contact during the downturn, as it provides an opportunity to return confidence to the client after most have lost significant amounts of their wealth.
• Australian wealth managers see increased face-to-face contact, gaining better leverage from relationship managers and convincing clients that they are financial sound as key methods to increasing share of wallet.

• Understand the HNW population's investments by sector and geography, appetite for risk, and reasons for choosing/leaving their wealth service
• Assess the threats and opportunities for wealth managers by understanding how peers are planning to grow revenues, acquire and keep clients

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