The Australian, April 4, 2017:
Australia’s one million strong army of self-managed super fund operators often operate in isolation, but a report released yesterday offers an exceptional snapshot of changing attitudes across what is now a diverse and ever more powerful group of investors.
Indeed, the isolation of many DIY investors may well underpin a clear preference among a sample of more than 1300 investors in the report for face-to-face contact with advisers. In fact only 18 per cent of SMSF operators said they would feel comfortable using roboadvice — a notch higher than the 20 per cent who had the same opinion among ‘‘public funds’’, but still a portion which suggests the roboavice industry will face stiff winds in the years ahead.
Perhaps the most surprising results from the report — a joint venture between CBA and The SMSF Association — is the key rationale for having an SMSF is not as many might expect the hunt for lower fees. Rather it is the considerably healthier search for better returns.
The report says 59 per cent of investors cite better returns as one of the main reasons to strike out independently with an SMSF compared to 53 per cent who nominated the more predictable imperative of ‘‘control’’ and 43 per cent who cited lowers costs.
Perhaps the most insightful aspect of the survey is the breakdown of what type of advice investors actually seek when they visit a financial planner. The report confirms other recent surveys which found the ‘‘great unknown’’ for retail investors is not tax or compliance or indeed many of the regular issues which feature in coverage of superannuation. Instead it is the vexed issue of ‘‘asset allocation’’.
The related issue of advice on specific products or companies is also very high on the agenda.
Also advice on asset allocation is only sought from financial planners rather than accountants. When it comes to accountants retail clients are looking primarily for tax and compliance advice.
In aiming to offer a birds-eye view of a sector has been rocked initially by the confusion around new superannuation reforms and more recently by the double blow of pension access cutbacks and the range of superannuation tax reforms due to begin on July 1, the report puts forward what it calls four significant ‘‘investor profiles’’ which typify most SMSF investors. The report does cover itself in warning: ‘‘Not every investor fits neatly into a single profile as they become more experienced and their requirements evolve.’’
The four profiles are:
The Outsourcer: According to the report this group is neither particularly wealthy nor particularly able (or willing) to run their own SMSFs. They can be virtually any age and are willing to outsource almost any aspect of running a DIY fund.
Almost half this group spends more than $3000 a year on advice and they will invariably seek advice from a financial planner rather than an accountant.
The Coach Seeker: This is the group with the largest share of new SMSF operators even though the average age here is 53. The group has the highest proportion of investors with “two or more advisers’’ at 41 per cent.
The Self-Directed Investor: This is the ‘‘core’’ group of DIY fund operators and perhaps the one that stands largest in the public imagination. They generally have held funds for more than a decade — which means they endured the GFC as independent investors and remained independent.
The Controller: This is the largest group — it also contains the wealthiest SMSF operators in the country and no doubt many of the population that will be struggling to deal with the looming $1m retirement balance ‘‘cap’’ which begins on July 1.
A massive 73 per cent of this group describe themselves as ‘‘confident or very confident’’ in controlling their finances and they had a ‘‘strong desire to be closely involved in managing their investments”.
Curiously, the majority — a slim majority admittedly — 52 per cent of this group have just one adviser, and as the report concludes, rather than broad advice they are looking for ‘‘specialised and transactional advice rather than the holistic model offered by many financial planners’’.