AUSTRALIA'S wealthy have endured significant losses with around half reporting a loss in assets of up to 30 per cent, pushing nearly one quarter of investors out of the $1 million plus asset bracket. But the mega rich remain largely unaffected.
The End of Certainty, an in-depth study of high net worth Australians’ investment and advice behaviour in a post GFC environment has been released by financial research company CoreData.
It surveyed 1700 Australians with investment assets of more than $1 million and found Australia’s wealthy had polarised as a result of the GFC.
Ambitious investors, those who recognised low share and asset prices as an opportunity to grow their portfolio, have benefited significantly while frozen or risk adverse investors preferred the safety of cash-like assets.
“Our survey shows those who responded aggressively to the rapid change in asset prices have seen their returns grow significantly during the economic recovery,” says CoreData principal Andrew Inwood.
“Defensive investors who remained frozen in cash and cash-like assets during the GFC failed to achieve anything close to the same returns. In an investment environment where around half of high net worth investors are reporting losses of up to 30 per cent, ambitious investment has certainly paid off.
“For many of the nation’s rich, this is the most significant fall in wealth they have ever experienced and it has had a devastating impact on their retirement savings.”
The report shows significant growth in the number of high net worth individuals leaning towards ultra-conservative investment decisions with around 43 per cent registering as risk averse in 2009 compared with 11.5 per cent in 2007.
“Like all investors, Australia’s wealthy have had a turbulent time over the past two years, largely as a result of the exposure they held to the sharemarket, unlisted products and products that suffered total capital loss. The conservative trend amongst this group is a clear reaction to these losses,” says Inwood.
The findings include:
Around 50 per cent of HNW investors reported a recent loss of 21-30 per cent
The number of individuals holding more than $1 million in excess funds has contracted by 15-25 per cent.
Cash and cash-based products are now the fastest growing asset class, though this is showing some signs of easing.
Currently more than half (51.3 per cent) of HNW individuals see cash and cash-like assets as the best investment option, with property, Australian shares and International shares ranking behind.
Only 36.9 per cent of HNW individuals surveyed have an ongoing relationship with a financial planner.
Overall those HNW individuals that have a financial planner are satisfied with their services. However, the satisfaction level with advisers’ investment performance is relatively poor.
There is some evidence that adviser switching may be on the increase with 68.1 per cent suggesting they would change providers if their investment performance continued to deteriorate.
The key indicator of poor performance for HNW individuals was a loss of 10 per cent or more.
The core reason for HNW individuals not to have an adviser has remained steady, these investors believing they are able to do better themselves.
Mega rich not affected
The collective wealth of the country’s top executives has increased by almost three quarters — or about $15 billion — over the past year, outstripping gains by ordinary investors.
According to the BRW 2010 Executive Rich List, the total wealth of Australia’s top 200 business chiefs ballooned to $35 billion in 2010, up from $20.3 billion in 2009.
Media mogul Rupert Murdoch retained the top spot, almost doubling his wealth in the year to around $6 billion from $3.4 billion a year earlier.
The combined wealth of Australian executives was 72 per cent higher than last year, more than the 55 per cent rise by the sharemarket over the same period.
Fortescue Metals Group chief Andrew Forrest came in second with $4.79 billion in wealth, doubling his net worth from $2.37 billion over the 12 month period.
James Packer moved up to No. 3 after Consolidated Media Holdings was added to his Crown casino fortune. Packer now has $3.4 billion, more than double the $1.54 billion he had last year.
Clive Palmer retained Queensland’s No.1 spot with more than $3 billion in assets – a figure set to grow following deals on the table.
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