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Affluent Investors Grow by 45,000

Posted by James Hill on March 4, 2023
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The ranks of the “established affluent” in Australia swelled by 45,000 people last

Investment Trends, a research consultancy, classifies people with more than $1 million excluding the family home and superannuation (but including self-managed superannuation fund assets) as “high net worth”.

Those with between $2.5 million and $10 million are the “established affluent”.

They are better off than the “emerging affluent” (with between $1 million and $2.5 million) but have not yet reached the heights of the “ultra high net worth” category, which takes in people who have $10 million plus.

“Overall, the number of affluent investors increased over the last year to 635,000 investors and they hold $3 trillion in investible assets,” the 2023 Investment Trends/Praemium High Net Worth Investor Report says.

“The graduation of 45,000 individuals into the established affluent was a notable change.”

Growth in the established affluent category was larger than other categories because people with this level of wealth tend to have heavy exposures to equities and property, which performed well last year.

But the outlook for the coming year is less rosy, with many wealthy investors fretting about inflation, a possible return to the White House by Donald Trump and the Chinese economy, according to the report, which is based on a survey of 6000 investors.

“With increasing inflation and costs of living the proportion of [high net worth] investors looking to primarily target a sustainable income stream has surged in the past year to 38 per cent, up from 33 per cent in both 2022 and 2021,” it says.

“The mindset shift towards income generation is consistent across all wealth brackets.”

Only 8 per cent of ultra high net worth respondents had ambitions to maximise capital growth compared with 20 per cent two years ago. Even so, they nominated Australian equities as the best asset class for high-yield generation.

“The typical high net worth investor portfolio now has greater exposure to term deposits after four consecutive years of decline,” the report says.

Respondents were also worried about Labor’s plan to double tax on superannuation assets above $3 million from 15 per cent to 30 per cent, which shows up as a spike in concern about “regulatory change”.

The federal government has announced the tax increase but it will not begin until 2025, which is after the next federal election.

Ninety per cent of ultra high net worth Australians have a self-managed superannuation fund, the report says.

SMSFs are also the “prevailing structures that come to mind for high net worth investors considering wealth transfer, with 33 per cent either currently using or intending to use them for this purpose”.

“More [wealthy Australians] than ever have self-managed super funds, and the wealthier they are the greater that percentage.”

In the ultra high net worth category, the average age is 70 and common occupations include business executive (29 per cent) engineer (14 per cent) and medical doctor (11 per cent).

“[Respondents] remain optimistic about market performance anticipating around a 2 per cent increase in the market, but are bullish on the performance of their own portfolio expecting a 7.8 per cent increase in their portfolio relative to last year at 5.5 per cent.”

In the past year ultra high net worth investors have significantly increased their exposure to both alternative assets and cash and term deposits, the report says.

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