Those who use CNBC to get their fix of Wall Street news have likely seen an inordinate number of reports about Australia on the business news site recently. It seems even our federal election is newsworthy for CNBC these days — but perhaps it has just been a slow news week on Wall Street!
One recent scoop reported by CNBC titled "Slowdown not stopping Australia's millionaire factory" discussed some recently released research from WealthInsight.
According to WealthInsight:
"by 2017, there will be an estimated 402,000 millionaires in Australia, a 33 percent increase from 2012. The majority of these new 100,000 millionaires will earn their wealth from financial services."
No, there's no typo, in just the next five years there is forecast to be 100,000 new millionaires in the country. WealthInsight's research suggests that the next wave of millionaires is expected to have profited from the financial services industry. Currently 18% of Australia's millionaires attained their wealth thanks to financial services, making it already the largest single source for churning out millionaires.
There is of course a difference between becoming a millionaire thanks to a salary within the financial service industry and achieving millionaire status from ownership of a financial services firm. The potential to get wealthy through ownership is what appeals to investors and the investment theme of strong future demand for financial services is a good one.
Financial services already account for 10% of Australia's national output and are forecast to rise of further. WealthInsight's research suggests Australia's wealth per capita is the second highest in the world — second only to Switzerland's. With these types of tailwinds it is easy to see why demand for financial services should remain strong.
With such an appealing tailwind investors should consider gaining exposure to the financial services industry. Three stocks which could be worthy additions to an investor's portfolio are:
- Macquarie Group (ASX: MQG) enjoys the moniker the 'millionaires factory.' Macquarie's significant businesses across funds management, investment banking and private high net worth advice make it well positioned to benefit from future growth in the sector.
- IOOF Holdings (ASX: IFL) has one of the largest non-bank aligned financial planning networks in the country and also owns the leading boutique funds management arm, Perennial.
- BT Investment Management (ASX: BTT) enjoys the support and distribution network of being aligned with Westpac (ASX: WBC). This has allowed BT to build up one of the largest funds management businesses in terms of funds under management.
Foolish takeaway
The ASX is home to a large number of financial services firms. Given the cyclical nature of the industry and also the potential for short-term underperformance, patient investors will find opportunities over time to add quality financial services firms to their portfolio.
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Motley Fool contributor Tim McArthur owns shares in BT Investment Management and Macquarie Group.
