Summary: A survey from the SMSF Association and nabtrade found more SMSFs are clinging to cash, while fewer women feel they have enough investing knowledge. Advisers are seeing an increase in requests from Gen X and Gen Y to take control of their super via SMSF. Newer trustees are less about DIY more about “help-me-do-it”, the survey found.
Key take-out: A higher proportion of SMSF trustees feel confident about what they are likely to experience in their retirement, compared to APRA fund members, the survey found.
Key beneficiaries: SMSF trustees and superannuation accountholders. Category: Superannuation.
If you are one of the million-strong DIY fund army, then between 2013 and 2014, there were big changes in your thinking, according to a survey by the SMSF Association and nabtrade.
Despite rising markets, more of us are clinging to cash. Sort of.
Those SMSFs holding more than 10 per cent of their funds in cash rose from 28.6 per cent to 42.9 per cent. This came during a period (from about May 2012), where equity markets were accelerating. But, given the following, possibly suggests that more people have moved away from the centre. More people are scared and more are prepared to take a risk.
The confusing aspect is that the overall cash allocation has fallen from 19.7 per cent to 15.9 per cent. A nearly 4 percentage point fall is significant – it’s a more than 19 per cent fall in numbers. All of it and more would appear to have gone into equities, which rose from 36.1 per cent to 42.6 per cent over the same period.
While more women are joining the ranks of SMSF trustees, fewer are feeling like they have enough knowledge to control their investments.
Women hold more cash in their portfolios than men and have rated their knowledge as having degenerated, on average, overall. The number of women who believe their knowledge is “poor” or “average” increased from 46.6 per cent to 63.5 per cent.
Younger Australians – those under 40 – seem to be the next big growth area.
The survey was sponsored by the SMSF Association (formerly SPAA, the Self-Managed Superannuation Fund Professionals Association of Australia) and nabtrade.
The survey is of 1000 super fund members, both SMSF trustees and APRA fund members. The survey, separately, also included questions asked of a number of SMSF professionals, including advisers, accountants and SMSF specialist lawyers.
SMSF startups are not slowing down.
There was a thought bubble running around a few years ago about the “peak SMSF theory” (see Will boomers bust super?, February 2, 2011). That suggested that the tipping point for SMSFs was close and that the number of new funds would be equalled by the number of fund closures, before shrinkage set in.
That was approximately 100,000 funds and 200,000 members ago. We’ve now got more than 560,000 funds and one million members. Clearly, it was codswallop then. And it’s looking no less like codswallop now.
I’ve ignored, till now, the main reason that this survey was undertaken. It was completed for the industry that serves SMSFs – financial advisers, accountants, service providers and lawyers.
And the information they have gleaned from it is also fascinating from your position as trustees.
Advisers are seeing a huge increase in requests from Gen X and Gen Y to take control of their super via their own SMSF. Advisers have reported a 65 per cent increase in interest in SMSFs from Gen Xers and a 22 per cent increase from Gen Y during the year between the surveys.
The makeup of why SMSFs are set up is changing also.
The initial phase of set-ups was for those referred to as do-it-yourself. But the survey, which has now been running for five years, says that newer trustees are less about DIY and more about “help-me-do-it” and “outsourcers”, or those who want others to do the work and are prepared to pay for advice, but like having the final say.
And then there’s the difference between the outlook on life between SMSF trustees, versus the rest.
When it comes to retirement readiness, there is a huge difference between those who are SMSF trustees, versus those who are members of APRA-regulated funds.
Across the board, 69.1 per cent of SMSF trustees are confident about what they are likely to experience in their retirement, versus 35.2 per cent for non-trustees (APRA fund members). The survey suggests that this could be because trustees are far more likely to have employed financial advisers (52.8 per cent) versus APRA-fund members (29.5 per cent).
And we’re getting used to the idea that government policy means we’ll probably be in the workforce longer.
Approximately 57 per cent of non-SMSF trustees said they would work through until 70 if the retirement age was increased. But just 42 per cent of young SMSF members believed they would need to.
The information contained in this column should be treated as general advice only. It has not taken anyone’s specific circumstances into account. If you are considering a strategy such as those mentioned here, you are strongly advised to consult your adviser/s, as some of the strategies used in these columns are extremely complex and require high-level technical compliance.
Bruce Brammall is managing director of Bruce Brammall Financial. E: bruce@brucebrammallfinancial.