The latest Investment Trends research shows the number of high net worth individuals (HNWI) in Australia has risen to a record 460,000 people, reasserting Australia as one of the wealthiest countries in the world.
Despite recent falling house prices and economic uncertainty, the number of HNWIs rose 5.7% in the year to October 2018.
‘Net worth’ is a term used to describe the value of assets you have minus liabilities.
In Australia, high net worth individuals are generally deemed to be those with net investible assets over $1 million and earning over $250,000 annually. The Australian Tax Office (ATO) defines ‘wealthy individuals’ as those who control a net wealth of $5 million or more.
Customer Executive of NAB Private Jason Murray said the growth in the number of wealthy Australians can be largely attributed to big returns on investments and high-income earners contributing more of their income towards their savings and investments.
“It is fascinating what sets the ‘relatively wealthy’ apart and it’s not what generally comes to mind,” Mr Murray said.
“It is the extra focus on savings and investment that makes the difference, not the level of income or profits from a business. There is just no substitute for a long-term savings and investment strategy.”
Share market volatility, economic uncertainty the biggest concerns
HNWIs said share market volatility, market crashes, the broader Australian economy, and global geopolitical risk were their biggest concerns towards investing.
Such concerns led 43% of HNWIs to make big changes to the allocation of their assets last year, with most opting to make their portfolio more diversified or defensive.
The research also showed the way wealth is grown and protected has also shifted, with HNWIs preferring to invest in managed investments like ETFs, funds and LICs rather than putting their money into direct shares or property.
“While the broader environment has impacted HNWI investing sentiment in general over the past year, what we are seeing is the appetite for growth-oriented investments is actually increasing,” Mr Murray said.
Over 54% of HNWIs said capital growth was their biggest investment goal for the year. Investment property, direct international shares, unlisted index funds, and managed accounts were the most favoured investments for growth.
Investors more socially and ethically minded
Investment Trend’s research found that investors are increasingly taking more notice of environment, social, and governance (ESG) considerations into their investment decisions.
But the ESG focus area differed between generations – younger investors were more environmentally-concerned, while ‘social factors’ were more of a focus for middle-aged investors and ‘governance’ was a key consideration for investors aged 50+.