RESEARCH into self-managed super funds has given an insight into the attitudes of members of this fastest-growing sector of the superannuation industry. It also provides a big reason why traditional financial planners have been so eager to criticise SMSFs.
The study was done by Rice Warner, an actuarial firm specialising in research for the financial services industry, on behalf of the Self-Managed Super Fund Professionals Association of Australia and fund manager Vanguard.
As part of the research, SPAA members were encouraged to send a survey containing 69 questions to their SMSF clients. The questions covered such topics as the benefits and risks of an SMSF, investment choices and product awareness, retirement planning and expenditure, and financial advice.
The answers to the questions on financial advice produced some of the most interesting results.
For many years, SMSF trustees have been criticised by the product-focused sector of the financial services industry for holding too much cash and not being proactive enough in managing their super funds' investments.
The survey's findings contradicted this criticism. Forty per cent of trustees that responded review their fund often more than fortnightly, with 51 per cent reviewing their fund more than quarterly.
One of the reasons for the baseless criticism of SMSFs by some sectors of the financial services industry can be explained by another finding of the survey. This related to the reasons why trustees of SMSFs were not happy with the competency of financial advisers.
The main reasons given by trustees for being dissatisfied with financial advice included:
Advisers were more interested in the products they sold than the return for clients.
The advice given was too simple and general in nature and the cost could not be justified.
The financial advice provided by advice firms owned by fund managers was highly conflicted by what was on the approved list and platforms.
The survey also found a direct link between the level of satisfaction with advice and its cost. Seventy-five per cent of trustees recognised they needed strategic advice, rather than product-oriented advice, and were prepared to pay more than $2000 for it.
Another reason for SMSF trustees being critical of financial planners is they have a higher level of financial literacy.
Unlike many members of industry and commercial public offer funds, who often seek limited and simple advice, SMSF trustees have above-average scores on financial literacy, understand high-level investment concepts, and have a good understanding of risk and return.
When it comes to SMSF trustees getting advice, they clearly don't want this to be based on product sales, which are more linked to commissions and remuneration strategies for the adviser, but want their adviser to provide high-level strategic advice and have a knowledge and skill level greater than their own.
There were no surprises in the results of the survey when it came to the key benefits of an SMSF and what trustees regard as their biggest risk.
The major benefits of an SMSF are the level of control that the members have and the flexibility when it comes to investments.
The biggest risk has nothing to do with advice or investment performance, but has everything to do with the constant meddling by successive federal governments with superannuation. Of the trustees responding to the survey, 83 per cent were concerned about possible changes to superannuation or taxation law.
Frequently Asked Questions about this Article…
What research was done into SMSF members and who conducted it?
Rice Warner, an actuarial research firm, carried out a 69-question survey on behalf of the Self-Managed Super Fund Professionals Association of Australia (SPAA) and fund manager Vanguard. SPAA members were asked to send the survey to their SMSF clients to capture trustee views on investments, retirement planning and financial advice.
How often do SMSF trustees actually review their self-managed super fund investments?
The survey found SMSF trustees are actively engaged: 40% said they review their fund more often than every two weeks, and 51% review their fund more often than quarterly, countering the idea that trustees are passive or hold excessive cash by default.
Why are many SMSF trustees dissatisfied with financial advice?
Trustees reported several reasons for dissatisfaction: advisers appeared more focused on selling products than client returns, advice was too simple or generic relative to its cost, and advice from firms owned by fund managers felt conflicted because of restricted approved lists and platforms.
Do SMSF trustees want product-focused advice or higher-level strategic advice?
SMSF trustees prefer high-level strategic advice rather than product-focused recommendations. The survey found 75% recognised the need for strategic advice and were prepared to pay more than $2,000 for it.
What do SMSF trustees see as the main benefits of running a self-managed super fund?
Trustees cited two key benefits of SMSFs: greater control over their retirement savings and flexibility when it comes to selecting and managing investments.
What do SMSF trustees regard as the biggest risk to their funds?
The biggest concern among trustees is political and regulatory risk: 83% were worried about potential changes to superannuation or taxation law by successive federal governments, rather than advice quality or investment performance.
Are SMSF trustees generally financially literate compared with other superannuation members?
Yes. The survey reported that SMSF trustees have above-average financial literacy, understand high-level investment concepts, and have a good grasp of risk and return—helping explain why they demand more sophisticated, strategic advice.
Does the survey challenge the common criticism that SMSF trustees hold too much cash?
Yes. The research contradicted that criticism by showing active monitoring habits—many trustees regularly review their funds—suggesting SMSF members are more engaged in managing assets than some product-focused sectors of the industry claim.
Call 1300 880 160
Start a chat
Schedule a call
