Wealthy Investors Pursue Higher Returns Amid Risk

As the global economy stabilizes and investor confidence increases, a growing number of investors are seeking exposure to international equities such as tech mega-cap stocks. The use of managed portfolio mechanisms like separately managed accounts is also on the rise among high-net-worth investors. 

"These structures give investors the ability to build strong core foundations with diversified portfolios that eliminate the hassle associated with implementation and rebalancing," explains Smoker. "This enables them to focus more time on identifying satellite investment opportunities that can enhance returns." 

Investment Trends' data indicates a significant shift in investment strategies among high-net-worth individuals. "We've observed a considerable increase in term deposits usage, rising from 29 per cent in 2022 to 39 per cent in 2023," says Yigit Gunhan, Senior Analyst at Investment Trends.  

Direct shares now comprise around one-third (33%) of an average high-net-worth portfolio compared to only 30% last year; while ultra-high-net-worth investors—those possessing over $10 million—have substantially increased their exposure towards alternative assets. 

Gunhan further notes a burgeoning emphasis on sustainable income streams which suggests a broader movement away from prioritizing capital growth alone. 

The Baby Boomer generation holds immense wealth, where research shows Australians aged above sixty will transfer approximately AUD$3.5 trillion worth of wealth onto younger generations within the next two decades, making intergenerational wealth transfer an important consideration for these wealthy individuals. 

"High-net-worth investors express an increasing need for guidance when it comes to planning and ensuring secure transition of their wealth onto future generations," states Smoker. 

It's essential for upcoming generations receiving this inherited wealth to be well educated about responsible asset management—a task wherein wealth managers play crucial roles by providing support, guidance and expertise necessary for understanding complexities related with managing inherited assets responsibly. 

Moreover, younger wealthy investors increasingly prefer impact investing aimed at creating positive societal impacts through their investments choices. 

"Impact investing, when amplified across high-net-worth investors, can make a real difference," Smoker adds. 

Sustainability is now an integral part of the decision-making process among these wealthy individuals. "Environmental impact, health and wellbeing, social change and community are front-of-mind for them," says Smoker.  

High-net-worth investors seek assistance in aligning their financial objectives with personal values—a trend expected to permeate the intergenerational wealth transfer taking place currently. 

Access to knowledge through digital platforms is indispensable for these tech-savvy investors who expect white-glove services combined with smart technology. 

However, within the high-net-worth category there exist numerous permutations. Some prefer delegating portfolio management responsibilities onto advisers while others value managed account structures that allow outsourcing investment selection and portfolio management tasks to experienced investment teams like ours,” explains Smoker. 

Many self-directed investors prefer controlling their asset base by seeking unique opportunities that supplement existing investments complementarily. However, regardless of differences between individual investor preferences, vigilance in balancing risk against reward remains a shared trait among all. 

"Diversification serves as an important strategy for high-net-worth individuals wanting to safeguard portfolios from concentration risk besides managing volatility effectively," says Smoker. 

"Owning diversified assets ensures no single investment can significantly harm the overall portfolio—fundamental requirement for such investors prioritizing wealth preservation." 

Going forward, issues including macroeconomic landscape changes; geopolitical tensions; de-globalisation; interest rate uncertainties along with rising cost of living; artificial intelligence advancements and clean energy transition constitute themes closely tracked by high net worth individuals. 

"The biggest opportunities involve productivity gains brought about by technological advancements whereas ever-expanding debt required fuelling our credit-dependent global economy poses greatest growth risks", states Smoker. 

At Commonwealth Private we emphasize on long-term wealth preservation and growth aligned well with CBA's core values focusing on customer satisfaction. We collaborate seamlessly ensuring clients have a coordinated and seamless experience during whole-of-wealth conversations with us," says Smoker. 

"Being flexible, we approach customers on their terms tailoring our model offering as per individual needs." 

To know more, please call Commonwealth Private at 1300 362 081.