Outstanding New Wealth/Investment Adviser Westpac Private Bank Investor sentiment indicator Insights into the investment intentions of wealthy Australians Quarter 3, 213 $1 Million - $3 Million Outstanding Relationship Manager Outstanding Institution
Welcome to the quarter 3 Westpac Private Bank Investor Sentiment Indicator As part of our ongoing commitment to developing a deeper understanding of the attitudes, behaviours, needs and perspectives of high net worth (HNW) Australians, Westpac Private Bank is delighted to release the Quarter 3 edition (July September 213) of our Investor Sentiment Indicator. The Indicator is an aggregate measure of investor sentiment for HNW Australians across the following areas: Expectations regarding the performance of the investment market Perceptions of their current financial situation Future investment intentions. As a Westpac Private Bank client we would like to share with you the latest key insights and hope you find the report of value, given that you are part of the HNW segment. The data from the Q3 213 survey reveals that HNW investor sentiment is more optimistic, with the overall sentiment score rising by 11.3 points from Q2 to +18.3 in Q3. This relatively optimistic outlook suggests the potential for new wealth opportunities, which we outline at the end of this report. During Q3, the Australian equity market hit a five-year high and consumer confidence peaked at its highest since 21. The Australian dollar recovered as a result of the US Federal Reserve s pull back on its tapering decision, China showed signs of ongoing economic strength while NSW and WA experienced a continued rise in property prices. Combined with expectations of improved political stability, on the back of the Coalition election win, high net worth investors (HNWIs ) business confidence was bolstered, leading to a more optimistic approach when evaluating investment opportunities. As previous reports have highlighted, the HNW segment continues to be more positive about the future than their Mass Affluent counterparts. At Westpac Private Bank we pride ourselves on delivering insight-led, timely investment solutions which can help our clients and their families achieve an enduring financial advantage in all market conditions. We remain committed to providing you with dynamic solutions that protect and grow your wealth and we look forward to continuing our partnership with you. Jane Watts General Manager Private Wealth, BT Financial Group 2 Westpac Private Bank Investor Sentiment Indicator Quarter 3 213
Research background Westpac Private Bank and CoreData have partnered to undertake research to understand the sentiments, investment behaviours and service preferences of HNWIs in Australia. The research looks beyond historical data and uses a tool to map HNWI intentions. This report does not attempt to summarise all of the data which has been collected. It examines the predictive abilities that the data provides in particular, the way in which HNWI sentiment is an accurate predictor of investment markets in a post-global financial crisis environment. CoreData has been researching Australia s HNWIs since 22. The survey deployed by CoreData pays particular attention to asset class, investment type and product data to build a robust picture of the sentiments of Australia s HNWIs and how they are likely to behave quarter on quarter. The CoreData research panel has an estimated 17, Australians that satisfy the requirements of HNWIs namely, investment portfolio size of $1,, or more outside both their superannuation and principal place of residence. Those with an annual household income of $25, or more are also classified as HNWIs. Mass Affluent respondents, by contrast, have between $5, and $75, in investable assets. The research provides a rolling sample (24 213) which enables one to compare future intentions with past results. Interestingly, the research reveals that those who followed the predictions of wealthy Australians would have been better off than those who kept invested in the ASX2 index. The research was conducted between 23 August and 5 September 213. Westpac Private Bank Investor Sentiment Indicator Quarter 3 213 3
Investor sentiment HNWI sentiment soared in Quarter 3 (JULY SEPTEMBER) 213 HNWI sentiment increased in Quarter 3, with the overall sentiment score climbing to +18.3, compared to the previous result of +.7 in Quarter 2. The Mass Affluent investor sentiment also increased this quarter to -6.9 from -15.5 in Q2 213. As the dial below illustrates, Mass Affluent investor sentiment continues to be considerably more negative than their HNW counterparts. HNWI Sentiment Indicator: Q2 213 versus Q3 213 +.7 HNWI versus Mass Affluent Investor Sentiment Indicator: Q3 213-6.9 +18.3 +18.3-5 5-5 5 HNW Q2 213 HNW Q3 213 HNWI Mass affluent The HNWI Sentiment Indicator comprises five key drivers illustrated below, namely: market prediction, household financial security, investment satisfaction, new investment product purchase intention and intention to invest new money into existing investments. High Net Worth Investor Sentiment Indicator 2 1-1 -2 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Investor Market Prediction Better or Worse 1 5-5 -1 Q2 13 Q3 13 12 1 8 6 4 2 Household Financial Security Q2 13 Q3 13 1 5-5 -1 Existing Investment Satisfaction Q2 13 Q3 13 1 5-5 -1 Purchase New Investment Products Q2 13 Q3 13 1 5-5 -1 Invest New Money in Existing Investments Q2 13 Q3 13 4 Westpac Private Bank Investor Sentiment Indicator Quarter 3 213
HNWI Sentiment at record levels HNWI sentiment leapt to its highest level in the past two years. While investor intention has also increased to its highest point in two years in Q3 (-4.9 versus -12.), it still remains negative. Economic perceptions in Australia improved in Q3 213 with a new government elect and perceived political stability boosting business and consumer confidence. With the Australian equity market consistently outperforming the US market and reaching a five-year high in August, HNWI confidence in the future of the Australian equity market soared in Q3. This is due to anticipated rate cuts by the RBA, as well as an expectation that the US tapering will not be as rapid as predicted in the middle of the year. On the property front, NSW and WA have both experienced property uplifts, with an unprecedented auction clearance rate in Sydney in August. The mood about real estate is more upbeat than at any time since late 29, when the economy was coming out of the financial crisis. These market factors have impacted HNWI sentiment towards property investments in Australia, driving both an increased confidence in the property market and in household wealth. The Westpac Private Bank Investor Sentiment Indicator continues to be an insightful predictor of the direction of Australia s investment market. The graph below overlays the Indicator with the ASX2 Index performance since Q4 24. 4 3 Source: CoreData HNW Investor Sentiment Index ASX 2 7 65 Investor Sentiment Index 2 1-1 -2 6 55 5 45 4 35 ASX2-3 3 Q4 4 Q1 5 Q2 5 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 1 1 1 1 11 11 11 11 12 12 12 Q4 12 Q1 13 Q2 Q3 13 13 Westpac Private Bank Investor Sentiment Indicator Quarter 3 213 5
Economic and business outlook Growth expectations on the rise Close to a third of HNWIs are more positive in Q3 213 in their expectations that the Australian economy will continue to grow over the next quarter. Nevertheless, while +42.6% of HNWIs still believe that the Australian economy will slow either slightly or a lot, this is a drop from +68.4% who believed this in Q2 213. Comparing the next quarter to this past quarter, do you think the Australian economy will grow at a slower or faster rate? 6 HNWI Q2 213 HNWI Q3 213 5 4 % 3 2 1 Slow down a lot Slow down slightly No change Speed up slightly Speed up a lot HNWIs HAVE IMPROVED CONFIDENCE IN THE FUTURE OF BUSINESS CONDITIONS The proportion of HNWIs who believe that business conditions will improve in the coming quarter has jumped 19.8% points to 33.1% from 13.3%. Accordingly, the proportion of HNWIs who maintained that business conditions will worsen in the coming quarter significantly decreased to 27.1% from 52.5% in Q2. Comparing the next quarter to this past quarter, do you think business conditions in Australia will be better or worse? 6 HNWI Q2 213 HNWI Q3 213 5 4 % 3 2 1 Much worse Somewhat worse Neither worse nor better Somewhat better Much better 6 Westpac Private Bank Investor Sentiment Indicator Quarter 3 213
HNWI households are benefiting from better household financial conditions One in three HNWI respondents (33.6%) are now reporting better household financial conditions, up from 28.1% in Q2. Conversely, the proportion reporting worse financial conditions has fallen to 26.1% from 33.9%. How do you think the financial position of your household will change over the next 12 months? (HNWI) 45 HNWI Q2 213 HNWI Q3 213 3 % 15 Much worse Somewhat worse Neither worse nor better Somewhat better Much better Westpac Private Bank Investor Sentiment Indicator Quarter 3 213 7
Investor intention The Investor Intention Index is a subset of the Investor Sentiment Index and measures investors future investment intentions. A series of questions are asked to determine each measure. Like the Investor Sentiment Index, there is a considerable difference in sentiment between HNWIs and the Mass Affluent, with the latter much less likely to invest (-4.9 versus -25.2 respectively). The difference in intention may be explained by the fact that HNWIs tend to lead the market by about three months. While the intention of HNWIs to invest in markets has increased in Q3 (-4.9 versus -12.) to its highest level in two years, it still remains negative. HNWI Intention Indicator: Q2 213 versus Q3 213-12. -4.9 HNWI versus Mass Affluent Investor Intention Indicator: Q3 213-4.9-25.2-5 5-5 5 HNW Q2 212 HNW Q3 213 HNWI Mass affluent 8 Westpac Private Bank Investor Sentiment Indicator Quarter 3 213
HNWI confidence in equities strongly increased in Q3 The Investor Equities Sentiment Indicator measures investor sentiment towards equities. The HNWI Equities Sentiment Index has jumped to +17. points from -15.4 points. This is the second highest level in the past two years and is a reflection of the rallying of the ASX2. Mass Affluent investor sentiments towards equities have also moved into positive territory to +1.7points from -19.4 points. -15.4 HNWI Equities Indicator: Q2 213 versus Q3 213 +17. HNWI versus Mass Affluent Investor Equities Sentiment Indicator: Q3 213 +1.7 +17. -5 5-5 5 HNW Q2 213 HNW Q3 213 HNWI Mass affluent HNWIS are slightly less negative about the outlook for property The Investor Property Sentiment Indicator measures investor sentiment towards both direct and indirect property investment. Out of the four indices measured, property sentiment continues to be the most aligned between HNWIs and the Mass Affluent, with both still sitting in negative territory, with the HNWI Index at -1.6 points and Mass Affluent at -.9 points. HNWI Property Sentiment Indicator: Q2 Q2 213 versus Q3 213-4.3-1.6 HNWI versus Mass Affluent Investor Property Sentiment Indicator: Q3 213-1.6 -.9-5 5-5 5 HNW Q2 213 HNW Q3 213 HNWI Mass affluent Westpac Private Bank Investor Sentiment Indicator Quarter 3 213 9
Other research highlights Most HNWIs are satisfied with investments HNWIs appear happy to stick with current investments, with the proportion of those likely to withdraw money from investments remaining low (29.8%). More than three in five HNWIs (62.6%) report being happy or very happy with their investments. This is close to double the proportion of Mass Affluent respondents (35.6%). HNWI satisfaction is highest with direct residential property, with 81.8% happy or very happy with their investments, followed by superannuation (68.5%) and direct Australian equities (64.6%). It is lowest with savings accounts (28.4%). One in three HNWIs (33.6%) expect better investment markets in general in the next three months, up from 19.8% last quarter. This is slightly ahead of Mass Affluent expectations (28.1%). Property and Australian equities market expected to do well More than three in five HNWI respondents (62.4%) believe that residential property will perform better next quarter, while 51.9% assume that Australian share performance will improve. HNWIs are more likely to believe that international equities and property trusts will perform with greater buoyancy while they typically assume that the bond market and cash will perform at less attractive levels. HNWIs expect equities to beat property Two in five HNWIs (44.3%) believe that the Australian share market will outperform residential property in the coming quarter, compared to 31.3% who believe it will underperform. This is in contrast to Q2 when 46.5% of HNWIs expected the share market to underperform, and only 28.6% expected it to outperform. Mass Affluent respondents are more likely to believe that the share market will underperform than outperform property (37.5% versus 31.6%). Majority willing to take risk HNWIs are still polarised over their desire for safety versus security when it comes to employment. There is still a majority that would be willing to take on a role with less job security but with more pay (51.9%), similar to last quarter when 53.3% said the same. More HNWIs are classed as conservative This quarter there are fewer investors who describe themselves as risk takers (21.6% versus 38.8%), while more who see themselves as conservative investors (32.1% versus 2.7%). Two in five describe themselves as moderate investors looking for returns without much risk with a view to income (46.3%), higher than in Q2 (4.5%). HNWIs are more active than Mass Affluent The proportion of HNWIs that have reinvested (42.5%) has remained relatively high compared to the last quarter (41.3%). Only one in four HNWIs (26.1%) have purchased new investment products in the past 12 months, down from 36.4% in Q2. As in previous quarters HNWs are more likely to invest new money in existing investments, purchase new ones or withdraw money from existing investments than their Mass Affluent counterparts. % 5 4 3 2 1 Very conservative Conservative predominantly looking for income with very little exposure to risky assets Moderate looking for returns without much risk and with a view to income Willing to invest in some riskier assets to achieve higher returns Conservative Risk-taker Willing to invest mainly in riskier assets to get higher returns 1 Westpac Private Bank Investor Sentiment Indicator Quarter 3 213
Outstanding New Wealth/Investment Adviser Conclusion The research reveals HNWI sentiment has increased strongly, resulting in a far more positive outlook than previous quarters. This rise in sentiment can be attributed largely to a change in government and perceived political stability. Stabilisations in Chinese growth, a more buoyant property market, as well as an equity market revival are also key contributing factors. Despite more positive sentiments, HNWIs remain cautious, are happy to maintain their current course of investment and are less likely to withdraw money from their current investments. In this current environment, HNWIs are seeking insight-led opportunities that will help them to create, build and protect their wealth. At Westpac Private Bank, we are having detailed discussions with our clients about a range of topics including: The range of yield-based avenues that can supplement their term deposits that now offer little to no positive real yield. Opportunities within the industrial and specialised commercial segments of the domestic unlisted real estate market where the security of capital and income is the driving factor. Investment opportunities in both global equity and credit markets. In global equity markets, focussed discussions are centring on the opportunity presented through the resilience of earnings and the quality of growth generally afforded to global multi-national companies. Meanwhile, global corporate-specific credit restructuring and distressed investment opportunities (that present less liquid yet far more superior risk reward than the overall fully priced, highly liquid public credit markets) continue to form part of client areas of interest and discussion. The importance of downside risk management as global markets are repricing risk across a range of sectors (including credit spreads, global emerging market debt, valuation-stretched yield focussed equities and safe haven assets such as sovereign bonds). Market recognition Westpac Private Bank was delighted to be recognised at the recent 213 Australian Private Banking and Wealth Awards. The awards are designed to recognise outstanding institutions and individuals within private banking, private wealth and private client services. These awards include the results of client surveys as part of the assessment and scoring process. Westpac Private Bank won the coveted Outstanding Institution ($1m $3m) Award for the second consecutive year. In addition, the quality of our team was also acknowledged with Outstanding Relationship Manager and Outstanding New Wealth/Investment Adviser. These awards will further spur us on to continue to provide you and your family with exceptional personalised services covering all of your banking and wealth needs. We also remain committed to delivering you with pertinent insights, expertise and relevant opportunities to ensure you enjoy an enduring financial advantage. $1 Million - $3 Million Outstanding Relationship Manager Outstanding Institution Westpac Private Bank Investor Sentiment Indicator Quarter 3 213 11
Contact us. To find out more, please call your Westpac Private Banker today. Things you should know The information in this update is current at September 213. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. Westpac Private Bank s Financial Services Guide can be obtained by contacting your private banker. This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. Information in this publication that has been provided by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It has not been independently verified and Westpac Banking Corporation ABN 33 7 457 141, AFSL No. 233714 ( Westpac ) is not in any way responsible for such information. It should not be considered a comprehensive statement on any matter nor relied upon as such. While such material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Any projections in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The results ultimately achieved may differ materially from the projections. Past performance is not a reliable indicator of future performance. PB13439-913ms