Wealth Management in Australia 2009

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

Highlights

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.

Reasons to Purchase

*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

Report Highlights
Highlights

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.
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Table of Contents 3
Table of Figures 4
Table of Tables 5
Australia's Wealth 6
After years of solid growth, the wealth of Australian investors was impacted by the global financial crisis 6
The Australian labor market started struggling in 2008 6
Conditions for business owners weakened, making it harder to generate wealth 7
Events in the global economy sparked selling pressure in the local stock market 8
Property prices in Australia declined after staging a small recovery in the lead up to 2008 9
Australian investors continued to pulled money out of equities 10
A flight to safety from household investors saw deposits become heavily favored in 2008 10
The wealth data in 2009 11
The Australian HNW Investor 12
Australian HNWs have become more defensive in 2009, but they remain more risk-seeking than the Asia Pacific average 12
Equities represent an important asset class for Australian HNWs 12
Wealth management service implication: provide clients with regular market commentary and offer forward-looking opinions on the Australian and offshore equity markets 14
Innovative example from Australia: Commonwealth Bank provides clients with regular market updates and has a strong presence in the media 14
Over the next two years, equities and deposits will remain the most important asset classes for HNWs 14
Wealth management service implication: help investors position for the equities recovery while limiting risk 17
Innovative example from Australia: Macquarie has a capital-protected geared equity investment product 17
Australian HNWs have superior knowledge of investments and are more demanding towards their wealth managers 18
HNWs exhibit higher-than-average knowledge of products and market conditions 18
Wealth management service implication: providers should be focused on furthering the education levels of their clients 20
Innovative example from Switzerland: UBS is investing resources in its clients 20
Australian HNWs are demanding when it comes to their wealth management service 20
Wealth management service implication: wealth managers need to increase contact with their clients in their time of need 22
The global downturn has shifted the demands of Australian investors 22
Due to uncertainty in the markets, the majority of HNWs want investments that they can easily understand 22
Wealth management service implication: focus on understanding the client better and catering to their needs 24
Innovative example from the US: ClientFirst Wealth Management is for the client 24
The Australian Wealth Manager's View 26
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 26
The majority of HNW clients will be demanding direct equities over the next two years 26
Wealth managers expect to focus their resources on direct equity investments over the next two year 28
While personal relationships are still key in HNWs choice of wealth managers, they are focusing much more on the financial stability of providers 30
Financial stability is very important to HNWs in Australia 30
Australian wealth managers see personal relationships as their biggest strengths and investment performance as their biggest weaknesses 32
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 34
Financial stability has emerged as an important attribute this year for wealth managers to possess 34
Australian wealth managers are contacting their clients more frequently than their Asia Pacific counterparts 36
Australian wealth managers contact their clients over the phone more frequently than the Asia Pacific average 36
Australian wealth managers are slightly ahead of their Asia Pacific counterparts at getting in front of their clients 38
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 39
Appendix 41
The drivers of growth in the wealthy population 41
Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels) 41
Investment returns (market capitalization, interest rates and bond yields) 41
The following measures are not, in themselves, drivers of wealthy population growth 41
Market capitalization 41
GDP 41
The following measures are not drivers of wealthy population growth except under very restricted circumstances 41
Primary residence value growth 41
Inheritance 42
Methodology 42
Wealth Management Market Leaders Survey 2009 42
Global Wealth Model 42
The UK sub-model 42
Global sub model (for all other countries) 42
Forecasting methodology 43
Continuous refinement to the understanding of liquid wealth distribution 43
Datamonitor's wealth numbers compared with other wealth numbers 43
Bibliography 44
Definitions 44
Asia Pacific 44
Further reading 44
Ask the analyst 45
Datamonitor consulting 45
Disclaimer 45
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List of Tables
Table 1: What proportion of your HNWs' portfolios is allocated to the following five asset classes? 13
Table 2: HNWs portfolio allocation by product area now and in two years' time 17
Table 3: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 19
Table 4: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 22
Table 5: What are HNWs demanding today? 24
Table 6: Over the next two years, how much demand do you expect from HNWs for the following product areas? 28
Table 7: What product areas will your wealth management service focus most resources on over the next two years? 30
Table 8: What will determine HNWs' choice of wealth management service over the next two years? 32
Table 9: What are your company's biggest strengths and weaknesses today? 34
Table 10: What is the most effective means of increasing share of wallet today? 36
Table 11: On average, how often do your relationship managers speak by phone to each HNW client? 37
Table 12: On average, how often do your relationship managers speak in person to each HNW client? 39
Table 13: When speaking with clients, what do they most want to talk about today? 40
List of Figures
Figure 1: In 2008, the Australian labor market was hit by higher unemployment and lower average wages 7
Figure 2: The global financial crisis had a dampening effect on business conditions and confidence in 2008 8
Figure 3: Like most developed economies in the Asia Pacific region, Australia's stock market declined sharply in 2008 9
Figure 4: After a small surge in home prices between 2005 and 2007, prices declined in 2008 10
Figure 5: Australian investors adopted a defensive attitude towards investing in 2007 and 2008 11
Figure 6: The majority of Australian HNW wealth is invested in equities, with this accounting for 26% of all investments 13
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 16
Figure 8: HNW investors in Australia have greater product knowledge than the average Asia Pacific HNW investor 19
Figure 9: Personal relationships and personal contact are still paramount in retaining HNWs 21
Figure 10: In Australia, HNW investors' greatest demand is for simple, transparent investments 23
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 27
Figure 12: Wealth managers in Australia will be focusing most of their resources on direct equity investment over the next two years 29
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 31
Figure 14: The greatest strength of wealth managers in Australia is their personal relationships with clients 33
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 35
Figure 16: In Australia, most relationship managers speak to clients by phone approximately once a week 37
Figure 17: Relationship managers speak to clients in person between once a month and once a quarter 38
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 40
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