Don’t tell anyone, but if you want to be rich you have to think rich. YMM has the secrets to some of the wealthiest clients of financial advisors and private bankers.
- From the ground up
Most of Australia’s 20 wealthiest names have built their fortunes from property or mining. They make multiple investments and then invest in other areas, but they always start from scratch.
This rule is not applicable to the Packers (media and gaming), Pratt and Liberman (diversified), Neilson and Neilson (financial services), Stokes, media and Besen retail. So if you don’t like real estate or mining, consider media, packaging or retail as your starting point.
- Cash stash
The top 100 “family offices” in Australia have masses of cash, potentially over AU$20bn. Fixed income investments account for the largest proportion of portfolios, including those of mining families and property owners. Of course, since the GFC high-net-worth individuals have generally adopted more conservative/defensive strategies. Bank deposits are expected to remain one of the most important types of investments for Australia’s wealthiest families.
- It is important to take calculated risks
Although wealthy Aussies tend to be more cautious after the GFC, they are still willing to take on risk. This could explain why they are so fond of equities despite market volatility and are open to exploring other asset classes.
Property owners often want to diversify into stocks and hedge funds as well as fixed-income investments. Families that have a lot of mining wealth are looking to diversify their investments by investing in real estate, fixed income, or other options.
Australia’s most valuable portfolios include shares. Next are fixed income and real estate, which are the most popular alternative investments.
The hedge fund industry is more popular than ever with wealthy investors than it was with Asian high net-wealth. This may be because Australian hedge funds are managed the same as other managed funds. Australia’s largest hedge fund managers have over $20bn in assets, most of which comes from high-net-worth investors.
- Show your care
Australia’s mega-rich are also early adopters of responsible investing, wishing to incorporate environmental social and governance considerations into their investment decision making. They also recognise that this sector often delivers superior returns to more conventional investment management so they’re getting in ahead of the pack.
- Get educated
People with high net worth have more knowledge about investments and markets than those without. It is a good idea to get educated if your goal is to join them. If you are knowledgeable about financial markets and products, you will be able to make better decisions. Wealth professionals who are more concerned about making a sale than helping you won’t be able help you.
- Excellence is what we want
People with high net worth expect extraordinary service from wealth professionals. They choose to work with the same wealth professionals, and they do so carefully. These are the things you should expect from them. They desire long-term relationships and loyalty. They also want excellence.
They only deal with wealth professionals with strong financial backing, not backyard operators. They expect advisors to have a good knowledge of financial markets and products.
- Keep it simple
Magnates are more open to other investments and equities than others, but they prefer simpler strategies and products. They seek simplicity and transparency when making investment decisions.
- Keep your friends close and your enemies close.
Gina Rinehart’s recent efforts to keep the details of a family feud away from the media and public offers great insight into how very private our wealthiest families and individuals are about how they manage their affairs. Family wealth should not be shared with anyone outside the family. This means that you and your family should continue to be involved in the business.
- Cleanest possible
A strict regime of keeping the family’s affairs in order is very important to the rich and powerful. Popular examples are margin lending facilities. They were trendy a couple of years ago but private bankers report some high-net-worth clients that haven’t used their margin loan facility for a few years are deciding to shut them down.
- Do your best and be prepared for the worst
Not all high-networth individuals will need kidnap coverage for themselves or their heirs. However, estate planning is an important component of protecting and building wealth. So don’t forget to have a current will, up-to-date beneficiaries and adequate insurance for your assets and income.