What are the hardest aspects of running your SMSF? And are there any areas where you would like financial advice but are not currently receiving it?
These are just two of the key questions asked in a comprehensive survey of almost 4000 SMSF trustees for the 2015 Self Managed Super Fund Report, recently published by Vanguard and specialist researcher Investment Trends.
The SMSF trustees’ answers to the two questions provide an exceptional insight into the challenges of running Australia’s 551,000-plus self-managed funds and into their unmet needs for professional guidance. (The survey is carefully structured so the answers reflect the views of the SMSF sector as a whole. Multiple answers were allowed.)
The five most-commonly cited difficulties of running an SMSF are not surprising. These are:
- Choosing what to invest in (32 per cent of funds).
- Keeping track of changes in SMSF rules and regulations (24 per cent).
- Dealing with paperwork and administration (23 per cent).
- Finding time to research investments (19 per cent).
- Understanding the rules (17 per cent).
These responses strongly confirm that in addition to perhaps receiving guidance regarding investment selection and fund administration, a large percentage of SMSF trustees acknowledge an unmet need for strategic financial advice. Indeed, almost 39 per cent or 213,000 of SMSFs have unmet needs for financial advice – much of this being strategic advice.
The key areas of unmet advice highlighted in the survey include: inheritance and estate planning (59,000 SMSFs), SMSF pension strategies (55,000), age pension and other social security entitlements (51,000) and offshore investing (41,000).
And other areas of unmet advice include: strategies for ensuring savings last for life (39,000) and transition-to-retirement strategies (38,000), borrowing within an SMSF (33,000), tax planning (33,000), investment strategy/portfolio review (33,000), ETFs (32,000) and investing for a regular income (30,000).
These responses clearly show that many SMSF trustees recognise the need for specialised, quality strategic advice that extends far beyond selecting investments.
Typically strategic advice includes such areas as long-term or target asset allocation and portfolio diversification, cost and tax efficiency, regular portfolio rebalancing and encouragement to invest in a disciplined, unemotional way.
Further, the 2015 Self Managed Super Fund Report, highlights the changing needs for strategic advice directed at an ageing of the Australian population. This is shown in the unmet need for advice in such areas as estate planning, SMSF pension strategies and how to plan for retirement savings to last for life.
In regard to strategic advice for older SMSF members, keep in mind that SMSFs hold more than half of the total superannuation money invested in retirement products (including transition-to-retirement pensions).
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Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment. |
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