Article written by Glenda Korporaal. Published in The Australian Sunday August 4, 2024.
Australia’s ultra-wealthy are increasingly looking offshore to invest their money, according to LGT Crestone chief executive Michael Chisholm.
He said trends including the rise of companies benefiting from artificial intelligence and opportunities in private equity and credit meant there were increasing opportunities offshore.
“Technology and artificial intelligence are having an increasing impact on investing,” he said. “We don’t see that slowing down.”
The largest companies benefiting from AI were listed offshore.
“It is going to have a significant impact on how clients invest their portfolios, forcing them to think about diversifying outside of Australia,” Mr Chisholm said.
Most Australian investors were “heavily concentrated in domestic equities as well as cash. But that is changing as we are entering a period of geopolitical uncertainty”.
Spun out of UBS in 2015 in a management buyout, wealth manager LGT Crestone has been carving out an increasing role in the high net worth advice sector, with assets under advice rising to $30bn.
Recent hires including former Escala Partners co-founders Mason Allamby and Steve Collins, who have just started after six months of gardening leave, have boosted the firm’s adviser bench strength to 110.
Mr Chisholm said the need for advice by Australia’s high net worths and the firm’s growing suite of products, which now includes mortgages, had seen revenue grow by 17 per cent to $180m in the financial year to June 30, including a 20 per cent increase in recurring advice fees which have contributed $150m of this.
Mr Chisholm confirmed industry speculation that his firm had hired Mr Allamby and Mr Collins, who have joined the Melbourne office as partners and investment advisers.
The two will lead a team supported by three other former Escala advisers, Chris Quigley, Steve de Bolfo and Amelia Kelaher, to provide advice to high net worths, family offices and not-for-profit organisations.
Mr Chisholm said Mr Allamby and Mr Collins had a “client-centric ethos and an exceptional track record”. Both worked in the UBS wealth management business before leaving to co-found Escala Partners in 2013.
Mr Chisholm left UBS in 2015 when the Swiss firm got out of wealth management in Australia, setting up Crestone with other former UBS executives.
LGT Crestone was bought in 2022 by interests associated with the royal family of Liechtenstein in a deal worth $475m.
He said the sale had made the firm more attractive as it allowed wealthy Australians the opportunity to invest alongside the family, which has a 900-year history. It also had allowed the firm to attract new advisers, hiring 23 over the past two years.
“I can’t see any other wealth management business which has come close to matching that,” Mr Chisholm said.
LGT Crestone recently hired another Escala founding partner, Paul Sealey, along with other partners including Joanathan Vickers-Willis, Matt Gavshon, and Ben Potter.
“These are outstanding people who are well regarded in the industry and have been in industry publications as some of the leading advisers in Australia for many years,” Mr Chisholm said.
He said increasing geopolitical uncertainty and the changing investment environment, from a long period of stability and low interest rates to one with a more volatile investment outlook, had increased the need for advice.
“The need for Australians to get investment advice has never been higher, and will continue to get higher over the next 10 to 20 years,” he said. At the same time, the number of advisers in Australia has been shrinking, particularly the number of advisers with the skill set and ability to advise high net worth and ultra high net worth clients.”
High net worth investors had more capacity to invest in less liquid or even illiquid assets as they had a longer time frame, he said.
“It takes a special type of adviser to be able to cover those client needs. The number of high quality advisers in the market is shrinking, so it is extraordinary that we have been able to increase our numbers by 23 in the last two years.”
He said there was now much more uncertainty about the outlook, with governments around the world becoming more protectionist and an increasing risk of trade wars.
The era of falling inflation was over, with inflation having spiked and expected to stay higher for longer.
“It’s a different investment environment which clients are going to have to think about carefully,” he said. This meant Australians had to think about investing in new asset classes, including opportunities offshore.
The big move from public to private markets also meant investors had to look at areas other than listed equities.
He said Australia was going through a massive transfer of wealth between generations as baby boomers retired.
“Over the next 10 to 15 years, we are going to see an enormous transition of wealth from the baby boomer generation to the next generation which is estimated to be around $5 trillion.
“That is causing a lot of people to reconsider what it means for their investment portfolio and if it needs to be reset for the next generation.
“It has created a need for advice about having a broader range of asset classes that Australians have traditionally invested in.”
The firm competes in the high net worth private wealth market alongside global banks including Morgan Stanley, Goldman Sachs and HSBC.
UBS is now getting back into the wealth management business in Australia following its global merger last year with Credit Suisse.
Mr Chisholm said LGT Crestone was looking at growing, which could include acquisitions.
“We still think there is a terrific opportunity to grow in Australia. When we created Crestone, we (were able) to build from the ground up with purpose-built modern technology.
“It gave us the ability to grow faster and have greater scalability than many other businesses which have a combination of legacy systems and new infrastructure.
“We still think there’s a huge opportunity for growth … (but) we are not going to be compromising our focus on quality or excellence.”
