- New EY Global Wealth Management Research survey finds 37% of Australian wealth management clients think that managing their wealth has become more complex over the last two years
- Younger Australian investors are more likely to switch into active investments during volatility, with 65% of Millennials increasing allocations compared to 33% of Boomers
- Australian clients appear more actively aware of declines in their portfolios than those in other markets, with the vast majority (97%) saying they change investment behaviour due to declines in portfolio value, significantly above the global average of 73%
Wealth managers will need to adapt faster than ever amid unprecedented levels of volatility and global uncertainty that is changing the way people invest in uncertain times, according to the 2023 EY Global Wealth Research Report.
The fourth edition of this detailed survey, which recorded the views of more than 2,600 wealth management clients across 27 geographies, including almost 100 in Australia, found more than a third of Australian clients (37%) think that managing their wealth has become more complex over the last two years, with 64% citing market volatility as a reason for their lack of financial preparedness.
Rita Da Silva, EY Oceania Wealth and Asset Management Leader, said:
“Given ongoing market volatility, investors have a lot of questions right now and they are hungry for advice. Continued market stress is amplifying their defensive stance and as well as their appetite for both switching and adding to their portfolio. The role of the wealth manager is crucial right now and will remain in the spotlight as they evaluate their risk models, provide sound advice, and take a proactive approach to the interwoven complexities that have evolved rapidly in the past few months. This is in addition to addressing the current uncertainty around the outcomes of the independent Quality of Advice Review on their advice and business models.”
According to the survey, over the past two years there has been a shift in the leading financial goals of Australian investors, with protecting wealth against losses and inflation now the top priority (58% in 2023 compared to 38% in 2021). Ensuring adequate income has dropped from the number one position in 2021 (64%) to fourth spot this year (27%), behind growing investment returns (46%) and wealth transition (28%). Meanwhile, reducing taxes has almost doubled as a goal among Australian respondents in the past two years (23% in 2023 compared to 12% in 2021) – although it still remains well below the 2019 survey result of 63%.
“The findings of the study are clear - investors are diversifying more so than ever and, given the recent global events, it will come as no surprise that immediate access to funds poses both an opportunity and a risk. Investment has become more complex and wealth managers will need to manage the associated operational challenges – including the rise of digital assets and ESG funds, and how investors are being influenced by market trends and economic uncertainty.”
Market volatility prompts proactive behaviour
Despite unrest in the market, the appetite to switch wealth management providers is high. Two in five Australian clients (41%) plan to add a new provider, move money to another provider, or switch altogether in the next three years.
The proportion of Australian clients working with FinTechs to manage their wealth is expected to more than triple over the next three years – from 8% to 28% – attracted by the sector’s low charges, specialised digital experiences and low-friction switching. That growth is significantly ahead of the global average, which is expected to double from 9% to 18% over the same period.
Appetite for advice grows
The survey shows investors are hungry for advice and expertise from their advisor to interpret economic, market and political shocks. Almost half (46%) of Australian respondents indicated they are looking for more advice across investment services, which is similar to the global average (48%) but the lowest among Asia-Pacific countries where the average is 56%. Among Australian respondents, mass affluent clients signaled the clearest appetite for more advice on investment services at 57%.
The survey also found that investors have acted in similar proportions in response to market volatility, moving to active investments and seeking safety with increased allocation towards savings/deposits. Almost all Australian respondents (97%) said they change investment behaviour due to a decline in portfolio value, and almost half (48%) have moved assets into active investments in the past two years. Conversely, only 36% have taken a more conservative move towards savings and deposits. The survey also found that half of Australian investors (51%) would seek additional financial advice, and 73% would review their financial plans in response to future volatility.
Scott Glover, EY Oceania Financial Services Strategy Leader, said:
“There is an appetite among Australian investors for more advice and for finding new ways of accumulating and protecting their wealth. Interestingly, it seems that investors are increasing the breadth of what they consider advice and how they choose to consume it. This sentiment, coupled with thinking around new advice models stimulated through the Quality of Advice Review, suggests the time is ripe for wealth management participants to lean into opportunities to assist Australians to grow, protect and enjoy their wealth beyond traditional concepts of financial advice.”
For more information, read the full report here.
