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Investments most daunting for trustees

SMSF trustees found investment selection was the hardest aspect of running their own fund, despite the desire for investment control, according to AMP Capital research.

The findings, from a study conducted by Investment Trends, showed 27 per cent of trustees surveyed named choosing what to invest in as the most difficult task.

That was followed by 24 per cent of trustees identifying the changes to SMSF rules and regulations as the most difficult, 23 per cent naming paperwork and administration and 19 per cent stating it was finding time to research investments.

“More than half the respondents to our survey said they set up an SMSF because they wanted more control of their investments and yet they identify investment selection as their most daunting task,” AMP Capital head of self-directed wealth and SMSF Tim Keegan said.

“It is also a task they largely do on their own – 44 per cent stated they make all the investment decisions for their fund, 23 per cent said decisions are made together with another member and 17 per cent make joint decisions with their financial adviser.

“The research again highlights the opportunities for financial advisers in the SMSF space.

“There is a segment of trustees who want advice, particularly in relation to finding the right mix of investments in order to meet their goals.”

The research also found trustees would like advice on pension and investment strategies, inheritance and estate planning.

Despite the findings, 76 per cent of trustees made at least one new investment for their SMSF during the past 12 months, while 35 per cent made between two and five investment changes and 16 per cent made between six and 10 changes.

Furthermore, 38 per cent of respondents made a substantial shift in their fund’s asset allocation during the same period.

Of that number, 24 per cent adopted a more defensive stance, 24 per cent increased diversification, 23 per cent changed their asset allocation due to their positive outlook on Australian shares and 22 per cent wanted their fund to focus more on income.

In other findings, 41 per cent of trustees said long-term aspirational goals drove most of their investment decisions, 39 per cent said it was funding additional personal goals and 37 per cent said meeting day-to-day expenses was what influenced their investments.

If they felt their goals were not being met, 48 per cent of trustees said they would change the mix of investments, while 27 per cent would seek advice from a financial adviser.

“As a fund manager, AMP Capital was also interested to see that portfolio diversification was the main reason why trustees intended to invest in managed funds,” Keegan said.

“They are seeking international diversification, access to different investment strategies and access to investments otherwise out of reach.

“International equities were the most popular managed fund in terms of where trustees are likely to put their money during the next 12 months.”

The research was based on a quantitative online survey of nearly 1000 AMP and AMP Capital SMSF investors.

Based on the study, AMP Capital has produced a guide for advisers, “Black sky report: the SMSF opportunity for financial advisers”, which contains insights to help them capitalise on the potential of this part of the market.

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