High net worth investors are looking to diversify away from the stock market, with private equity and property two of the preferred alternatives, a survey by BDO has found.
High net worth investors are looking to diversify away from the stock market, with private equity and property two of the preferred alternatives, a survey by BDO has found.
The accounting and advisory firm surveyed 350 private wealth advisors and high net worth individuals from 16 countries within its global network.
More than one third of the respondents were from Australia.
The survey focused on how individuals and families are rethinking their investment strategies following the COVID-19 pandemic.
It found that 69 per cent of high net worth people felt the need to diversify their investments.
More than half expect to make significant alterations to their wealth strategy following the pandemic.
BDO Perth tax partner Mark Pollock said many high net worth families were now looking to move away from volatile stock markets and increase their exposure to private equity-type investments.
He felt this was driven partly by COVID but also by market fundamentals.
“Following the COVID pandemic, we are seeing high net worth families and individuals taking a very cautious approach and not making rash decisions,” Mr Pollock said.
Another trend he observed was the increasing number of 'COVID refugees’: people returning to the safety of Australia’s largely COVID-free environment and world-class medical facilities.
Mr Pollock added this was fuelling the property market, as high net worth families returning to Australia had cash available to purchase a home without needing to go to the banks.
He cautioned that the return to Australia may have tax implications.
“Many high net wealth families have been living and working abroad for years, but they’re now back in the Australian tax system and possibly being taxed on their global earnings at very high rates compared to the countries from which they came,” Mr Pollock said.
The survey found that about two-thirds of respondents were concerned with the privacy and safety risks posed by tax transparency.
Under the Common Reporting Standard (CRS), the tax authorities in 113 countries have agreed to swap banking information of high net worth families.
These countries include a number of suspected tax havens, as well as a number of Australia’s trading partners including Singapore, Malaysia, and Indonesia.
Mr Pollock said the Common Reporting Standard was only the tip of the iceberg for reporting undisclosed foreign bank accounts, which may then lead tax authorities to dig deeper to uncover foreign assets like properties and privately owned investment companies.
“Our new report revealed this is a concern for many high net worth families wanting to return to Australia but not wanting to face a tax audit due to assets that may be hidden,” he said.
“It will be a balance that many will be considering: living in a country that is relatively COVID free with world-class medical facilities but facing tighter tax scrunity and the potential of a much higher tax bill.”
