We expect 2017 to be a turning point for the Australian wealth market, after growth slowed down over the past few years, with economic concerns having a negative effect on performance. Returning economic strength and more favorable equity market conditions will contribute to stronger retail investment savings growth, which in turn will translate into more robust wealth growth.
Between 2016 and 2020 liquid assets held by affluent individuals are forecast to record a compound annual growth rate (CAGR) of 5.9%, representing a sizable opportunity for wealth managers operating in the country. Yet there is notable regional disparity within Australia in terms of wealth distribution, with the vast majority of wealth found on the Eastern seaboard.
- At the end of 2016, of the approximately 18.7 million adults living in Australia, 19.1% (or 3.57 million) could be considered affluent.
- While expanding at a slightly slower pace than in previous years, wealth market growth in Australia will still be dwarfed by many other developed markets through to 2020, and wealth held by affluent retail investors is forecast to record a CAGR of 5.9% over the forecast period.
- While Australia's stock market has struggled in recent years (before regaining momentum in 2016), generous dividend payouts and a friendly tax system have seen retail investors' love affair with equities continue.
- Australian HNW individuals are heavily exposed to property in their non-traditional investments, with real estate investment trusts of particular interest.
- While HNW individuals in Australia invest offshore for a multitude of reasons, access to a wider range of investments is the main factor. But investors only hold a comparatively small proportion of their wealth offshore.
“Wealth in Australia: Sizing the Market Opportunity 2017” analyzes the Australian wealth and retail savings and investments markets, with a focus on the HNW segment. The report is based on our proprietary datasets.
Specifically the report:
- Sizes the affluent market (both by number of individuals and the value of their liquid assets) using our proprietary datasets.
- Analyzes which asset classes are favored by Australian investors and how their preferences impact the growth of the total savings and investments market.
- Examines HNW clients' attitudes towards non-traditional investments such as property and commodities.
- Identifies key drivers and booking centers for offshore investments.
- Examines the tax landscape in Australia and future implications for investors.
- Benchmark your share of the Australian wealth market against the current market size.
- Forecast your future growth prospects using our projections for the market to 2020.
- Identify your most promising client segment by analyzing penetration of affluent individuals in Australia.
- Evaluate your HNW proposition by understanding how the Australian tax system impacts HNW clients.
- Review your offshore strategy by identifying HNW motivations for offshore investments and their preferred booking centers.
- Australia's wealth market continues to represent a sizable opportunity
- Key findings
- Critical success factors
2. Sizing and Forecasting the Australian Wealth Market
- By 2020 affluent individuals will constitute 23% of Australia's adult population
- Australia's affluent population is forecast to record an AAGR of 5.8% between 2016 and 2020
- HNW individuals account for 1.0% of adults but hold 37.2% of liquid assets
- Affluent individuals hold 77% of Australian retail liquid assets
- Australia's onshore wealth is concentrated in the populous states of the eastern seaboard, while growth is to be found in the west and north
3. Drivers of Growth in the Australian Wealth Market
- While still impressive compared to other developed countries, retail savings and investment market growth dropped in 2016
- Australia's investment market outlook remains robust over the long term
- Australians' love affair with equities is not expected to end any time soon
- Growing at above market rate, retail deposit holdings will remain the largest asset class
- Deposit growth will continue to outstrip GDP growth
- Economic concerns suppressed retail investment holdings growth in 2016, but this is expected to change
- Equities and mutual funds are most allied to the performance of the Australian stock market
- Mutual funds are less sensitive to stock market movements than equities
- There is a negative correlation between the ASX S&P All Ords and retail bond holdings
- Retail bond holdings growth will be strong over the forecast period
4. HNW Investment Preferences
- HNW individuals' high allocation into superannuation is an opportunity for wealth managers
- HNW investors in Australia hold just over 14% of their wealth offshore
- Australian HNW investors prefer to invest their wealth at home
- Access to better investment options is the primary driver for HNW offshore investment
- The importance of tax efficiencies as a driver for offshore investments has decreased over the past few years
- HNW offshore wealth is held predominately in the US and the UK
- Australia has signed numerous TIEAs in an effort to combat offshore tax evasion
- Abbreviations and acronyms
- Supplementary data
- Exchange of information
- Liquid assets
- Mass affluent
- 2016 Global Wealth Managers Survey
- 2015 Global Wealth Managers Survey
- Global Wealth Model methodology
- Global Retail Investments Analytics methodology
List of Tables
Table 1: Australian income tax rates for residents 2016-17, applicable as of July 1, 2016
Table 2: Stamp duty levied in New South Wales, Australia
Table 3: Australia: total liquid wealth segmented by affluent category and asset band (A$bn), 2010-15
Table 4: Australia: total liquid wealth segmented by affluent category and asset band (A$bn), 2016e-20f
Table 5: Australia: adult population segmented by affluent category and asset band (000s), 2010?15
Table 6: Australia: adult population segmented by affluent category and asset band (000s), 2016e?20f
Table 7: Australia: total liquid wealth segmented by affluent category and asset band ($bn), 2010-15
Table 8: Australia: total liquid wealth segmented by affluent category and asset band ($bn), 2016e-20f
Table 9: Australia: adult population segmented by affluent category and asset band (000s), 2010?15
Table 10: Australia: adult population segmented by affluent category and asset band (000s), 2016e?20f
List of Figures
Figure 1: 19% of the Australian population can be considered affluent
Figure 2: HNW individuals hold 37.2% of liquid assets in Australia
Figure 3: Eastern Australia accounts for the majority of affluent liquid assets
Figure 4: Australia's retail investments market is forecast to record a CAGR of 7.0% between 2016 and 2020
Figure 5: Deposits account for 55.5% of the Australian retail investment market
Figure 6: Retail deposit holdings will continue to dominate, but bond holdings will perform strongest
Figure 7: Deposit holdings growth is forecast to exceed GDP growth
Figure 8: The local stock market regained momentum in 2016
Figure 9: Retail mutual fund and equity investments correlate strongly to the performance of the Australian stock market
Figure 10: Mutual funds are heavily invested in property and equity - and little else
Figure 11: Retail bond holdings tend to move in the opposite direction of Australia's All Ords index
Figure 12: HNW investors allocate 35% of their wealth into non-traditional investments
Figure 13: HNW individuals in Australia hold 14.1% of their assets offshore
Figure 14: Access to better investment options is the biggest motivation for offshore investment
Figure 15: Australian HNW individuals prefer to invest in the US and the UK
Figure 16: The Australian government has signed 38 TIEAs