Travel back to the 1980’s and private wealth management in Australia was a vastly different proposition to what it is today. Those earlier investors mostly chose between equities, bonds, and a few retail funds, and the experts in the field were essentially stock pickers. Our operations were limited to about six international markets and we had dealers specifically allocated to trading UK stocks for Aussie investors. At the time, it was pretty popular.

Today it’s a different landscape. From commodities to private capital markets, foreign exchange to tailored solutions utilising a mix of assets, the options available to investors has expanded dramatically, both domestically and internationally. ETFs have also changed the investing terrain significantly.

The firms servicing these clients have also adapted. Those competing in the high and ultra-high net worth space are chasing clients with anything from $2.5 million to $200 million in funds (and above). There are eight major players, of which JBWere is one of the largest from a funds under management (FUM) perspective.

Activity in the private wealth space has a significant influence on the economy. Investors with over $A2.5million to invest make up a nearly $A2.5 trillion pool of capital. Drop down to $1 million in investable funds and the pool expands to $3 trillion, of which about half will transition to a new generations over the next few decades.

‘From a business perspective, the private wealth market is no longer a poor cousin to institutional markets, which was the case back in the 80’s.’

From a business perspective, the private wealth market is no longer a poor cousin to institutional markets, which was the case back in the 80’s. However, it should be noted that for a long time it was private wealth that underpinned the growth of many of our now large, listed companies, and the impact of that investment is still having a big influence on the living standards of Australians.

An issue for all players involved in financial markets is the infrastructure in place to transact and report, like the Clearing House Electronic Subregister System (CHESS). Used by the Australian Securities Commission (ASX) to manage the settlement of share transactions and record shareholdings, it is due to be replaced. Modernising it and other financial transaction and reporting infrastructure is a real challenge that has yet to be resolved but needs ongoing investment.

A seven year project by ASX to replace CHESS was abandoned last year, and the existing system is now scheduled to be replaced in 2032, with new options to be released in the final quarter of this year. It highlights that legacy systems are a headache across financial infrastructure, requiring innovative, digital solutions.

These types of issues impact on how we transact for clients, and it’s certainly not an issue restricted to Australia.

When accessing international investments, particularly in areas like private capital markets, it generally requires big licks of capital and very patient money to make it work. That’s fine, but we become the custodians of those assets and we need to be able to report meaningfully to our clients about what they own and its performance. That is not always easily possible, or it is expensive to implement.

A lot of funds flowed into private capital markets during the low yield environment we have recently come through. As returns have improved in some of the more traditional investments markets, the inflows to private markets have tailed off a bit, but it remains of considerable interest to our clients.

Another major issue for wealth managers is the regulatory environment. We have a lot of discussions around portfolios that are focused on growth but with tail risk mitigation to manage catastrophes. A number of our clients like that approach as they have taken concentrated bets to get where they are, and it may not sit within a regulatory designation of a risk defined portfolio. The regulatory environment has made servicing retail clients expensive and has resulted in the business of wealth management focusing on larger clients. Interestingly the investor engagement with markets has remained high with a large proportion of Australian retail investors having exposure to ASX listed companies.

It’s also why taking on an education role in the industry is critical for us. We talk to regulators, bankers, politicians, and the broader community about how we approach markets but also what we do. There was a time when we used to just get on with our own work, but the financial advice ecosystem is complex and contains so many elements, and it impacts different levels of wealth in different ways. It is incumbent on us to be part of the machinery that influences how actions taken in this space impact more broadly. 

It all comes back to the incredible growth in wealth over the decades. That capital has a huge impact on the services a country can provide, and it needs proper reporting on so we can understand where it is coming from and how the different frameworks we place around that capital impacts its potency to enable societal growth. The way it interacts with the tax system has a big impact as well.