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Decoding the Investment Strategies of Wealthy Australians

Wealthy investors, having already amassed their fortunes, approach investment with a unique perspective that sets them apart from average investors. In dissecting their behaviours, we uncover lessons that go beyond conventional wealth management trends.

A Global Outlook

Diverging from the typical trio of asset classes—cash, properties, and shares—high net worth investors (HNWIs) adopt a distinctive approach even amidst the economic uncertainties fuelled by Covid-19 and inflation. Their focus revolves around wealth preservation, intergenerational wealth transfer, increased diversification, and a resolute global outlook.

"Australian HNWIs are increasingly looking offshore to access a larger pool of opportunities and achieve greater returns," observes Tyson Roberts, Managing Director at Vista Financial Group.

The ability to respond swiftly to major events, exemplified by the early defensive moves during the onset of Covid-19, highlights the strategic advantage of a global perspective. This shields portfolios from economic shocks, as seen in the substantial increase in bond and tailored investment transactions.

Risk Aversion in Uncertain Times

In times of uncertainty, high net worth investors lean toward risk aversion, seeking to safeguard their wealth by investing in safe haven or defensive assets. Sectors like supermarkets and healthcare, known for resilience during economic downturns, become focal points of investment interest.

"Investing in supermarkets, a sector likely to perform consistently, is a fairly safe bet even in erratic times," notes Roberts.

This risk-averse approach extends to defensive sectors like healthcare, witnessing a significant uptick in investment. The focus is on securing stable income streams that act as hedges against market volatility.

Increased Diversification Beyond Traditional Asset Classes

While retaining exposure to traditional asset classes, high net worth investors showcase more diverse portfolios. The demand for alternative assets, such as infrastructure, private equity and separately managed  

accounts, is on the rise among Australian HNWIs.

"HNWIs are diversifying into asset classes like fixed income, aiming for stable income streams without the volatility of the equities market," emphasises Roberts.

Separately Managed Accounts (SMAs) have become a preferred choice for high net worth investors seeking a more personalised and tailored approach to wealth management. SMAs offer a unique advantage by providing individual investors direct ownership of their assets while still benefiting from professional portfolio management. This level of customisation allows high net worth individuals to align their investments more closely with their financial goals, risk tolerance, and values.  

Unlike traditional investment funds, SMAs grant investors greater transparency and control over their portfolios, enabling them to make real-time adjustments in response to changing market conditions. For high net worth investors who value a hands-on and tailored approach to wealth management, SMAs serve as a powerful tool to optimise their investment strategies and achieve a more nuanced and sophisticated financial outcome.

Preserving Wealth for Generations

The mindset of high net worth investors revolves around preserving wealth for future generations, setting them apart from the goal-centric approach of average investors.

"When you're looking to preserve your money, you're more defensive in investment. It's about ensuring your money endures over multiple years and gets passed on to other generations," explains Roberts.

This long-term outlook prompts early tax and estate planning, allowing HNWIs to invest with the aim of leaving a legacy. The focus on generational wealth preservation also involves younger family members in decision-making processes, fostering a multigenerational approach to investment and personalised banking services.

In essence, the distinctive mindset of high net worth investors, coupled with a global outlook, risk aversion, diversified portfolios, and a focus on generational wealth, offers valuable insights for investors seeking to elevate their wealth management strategies.