Wealth Management in Australia 2009

Table of Contents

OVERVIEW

• Catalyst
• Summary
• Methodology

EXECUTIVE SUMMARY

• The wealth of Australian investors suffered at the hands of the global financial crisis
• HNWs have become more defensive, but equities still represent an important asset for the future
• Wealth managers are expected to invest resources into equities in the future, while financial stability has become particularly important for clients in the downturn

AUSTRALIA' S WEALTH

• After years of solid growth, the wealth of Australian investors was impacted by the global financial crisis
  • The Australian labor market started struggling in 2008
  • Conditions for business owners weakened, making it harder to generate wealth
  • Events in the global economy sparked selling pressure in the local stock market
  • Property prices in Australia declined after staging a small recovery in the lead up to 2008
• Australian investors continued to pulled money out of equities
  • A flight to safety from household investors saw deposits become heavily favored in 2008
  • The wealth data in 2009

THE AUSTRALIAN HNW INVESTOR

• Australian HNWs have become more defensive in 2009, but they remain more risk-seeking than the Asia Pacific average
  • Equities represent an important asset class for Australian HNWs
  • Over the next two years, equities and deposits will remain the most important asset classes for HNWs
• Australian HNWs have superior knowledge of investments and are more demanding towards their wealth managers
  • HNWs exhibit higher-than-average knowledge of products and market conditions
  • Australian HNWs are demanding when it comes to their wealth management service
• The global downturn has shifted the demands of Australian investors
  • Due to uncertainty in the markets, the majority of HNWs want investments that they can easily understand

THE AUSTRALIAN WEALTH MANAGER' S VIEW

• 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
  • The majority of HNW clients will be demanding direct equities over the next two years
  • Wealth managers expect to focus their resources on direct equity investments over the next two year
• While personal relationships are still key in HNWs choice of wealth managers, they are focusing much more on the financial stability of providers
  • Financial stability is very important to HNWs in Australia
  • Australian wealth managers see personal relationships as their biggest strengths and investment performance as their biggest weaknesses
• 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
  • Financial stability has emerged as an important attribute this year for wealth managers to possess
• Australian wealth managers are contacting their clients more frequently than their Asia Pacific counterparts
  • Australian wealth managers contact their clients over the phone more frequently than the Asia Pacific average
  • Australian wealth managers are slightly ahead of their Asia Pacific counterparts at getting in front of their clients
  • 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

APPENDIX

• The drivers of growth in the wealthy population
  • Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels)
  • Investment returns (market capitalization, interest rates and bond yields)
• The following measures are not, in themselves, drivers of wealthy population growth
  • Market capitalization
  • GDP
• The following measures are not drivers of wealthy population growth except under very restricted circumstances
  • Primary residence value growth
  • Inheritance
• Methodology
  • Wealth Management Market Leaders Survey 2009
  • Global Wealth Model
• Bibliography
• Definitions
  • Asia Pacific
• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: What proportion of your HNWs' portfolios is allocated to the following five asset classes?
• Table: HNWs portfolio allocation by product area now and in two years' time
• Table: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)
• Table: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)
• Table: What are HNWs demanding today?
• Table: Over the next two years, how much demand do you expect from HNWs for the following product areas?
• Table: What product areas will your wealth management service focus most resources on over the next two years?
• Table: What will determine HNWs' choice of wealth management service over the next two years?
• Table: What are your company' s biggest strengths and weaknesses today?
• Table: What is the most effective means of increasing share of wallet today?
• Table: On average, how often do your relationship managers speak by phone to each HNW client?
• Table: On average, how often do your relationship managers speak in person to each HNW client?
• Table: When speaking with clients, what do they most want to talk about today?

FIGURES

• Figure: In 2008, the Australian labor market was hit by higher unemployment and lower average wages
• Figure: The global financial crisis had a dampening effect on business conditions and confidence in 2008
• Figure: Like most developed economies in the Asia Pacific region, Australia' s stock market declined sharply in 2008
• Figure: After a small surge in home prices between 2005 and 2007, prices declined in 2008
• Figure: Australian investors adopted a defensive attitude towards investing in 2007 and 2008
• Figure: The majority of Australian HNW wealth is invested in equities, with this accounting for 26% of all investments
• Figure: By 2011, the majority of HNW assets in Australia will be invested in equities, with this accounting for a quarter of all investments
• Figure: HNW investors in Australia have greater product knowledge than the average Asia Pacific HNW investor
• Figure: Personal relationships and personal contact are still paramount in retaining HNWs
• Figure: In Australia, HNW investors' greatest demand is for simple, transparent investments
• Figure: 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
• Figure: Wealth managers in Australia will be focusing most of their resources on direct equity investment over the next two years
• Figure: 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
• Figure: The greatest strength of wealth managers in Australia is their personal relationships with clients
• Figure: The best way for wealth managers in Australia to increase share of wallet is to increase face-to-face contact with their clients
• Figure: In Australia, most relationship managers speak to clients by phone approximately once a week
• Figure: Relationship managers speak to clients in person between once a month and once a quarter
• Figure: The majority of clients in Australia want to speak to their wealth manager about the performance of specific asset classes within their portfolio