Personal Investment Market Projections Report 2012

Wealth managers have only tapped into a small part of the personal investments market…but that will change.

Rice Warner predicts assets held on investment platforms will most likely double by 2026 according to Rice Warner’s 2012 Personal Investment Market Projections Report.

Key Points

• The personal investments market, including personal investments held in banks, shares and investment properties was $1,943 billion at 30 June 2011.  This compares with $1,352 billion in superannuation assets (excluding unfunded public sector liabilities and the value of government pensions).
• The market includes investments held both directly by individuals and via investment products such as platforms, investment master trusts and life savings products.
• The personal investments market is expected to grow at a rate of 4.2% per annum in real terms 
  (7.3% per annum in future dollars) over the next 15 years.
• The superannuation market will grow more quickly over the next 15 years (6.3% per annum) due to the significant compulsory component within that market, driven by the superannuation guarantee.
• 93% of personal investments are held directly by individuals rather than via investment products and platforms provided by the major wealth managers.  This reflects substantial holdings in cash and term deposits (33%), investment property (46%) and shares (10%), with other asset classes making up the remaining 4%.
• Wrap platforms, including separately managed accounts and model portfolio products, will be the fastest growing segment, with its market share growing from 2% to 5% over the 15 years to 30 June 2026.
• Within wrap platforms, directly held assets will grow to become 64.0% of assets, compared to 38.0% currently.
• Assets held on wrap platforms and investment master trusts combines will grow to be more than two and a half times their current level (in 2011 dollar terms) in 15 years’ time.

Commenting on the report, Richard Weatherhead, a Director of Rice Warner said:

“The personal investments market is larger than the superannuation market when personal bank accounts, term deposits and investment properties are taken into account.

Whilst superannuation will grow more quickly in the future due to its significant compulsory component,  the personal investment market will become increasingly important as Australians seek flexibility of access to their savings and concessional contribution caps and other tax changes dampen the attractiveness of investing in superannuation.

Historically, the ease and simplicity of straightforward bank and term deposits and the lure of capital gains and negative gearing through investment property have led to these segments dominating the personal investments market, leaving wealth management products with only a modest market share.  However, we expect this to change as the cost of investment platforms falls and their sophistication and reporting capabilities increase, driven by ongoing technology improvements.”