A majority of financial planners favoured separately managed accounts (SMA) for their SMSF clients over direct equities and managed funds, according to a new white paper by private wealth management firm JBWere.
The “Evolution of SMAs: What do planners and investors really want?” paper revealed 51 per cent of planners thought their clients would be better off in SMAs.
“Having dealt with these guys for the last 20 years, I was surprised it was that high,” JBWere investment services executive director Andrew Tracy said during a media briefing in Sydney last week.
“SMSFs as we know are probably the most efficient way to have exposure to the Australian equity market – they’re low cost, transparent, you get complete control – and that’s exactly what investors have been doing in using their SMSFs.
“But I think that number, 51 per cent, might be slightly biased because it’s the planner’s opinion.
“If you asked the end client, I think that number would be significantly lower, but the planners are coming up against these capacity constraints, which are compliance, regulations, records of advice, statements of advice – all the pieces of paper that these guys have to do.”
The paper also found planners believed SMAs were most appropriate for two SMSF client demographics: those with balances of $100,000 to $250,000 and those with balances of $250,000 to $1 million.
“So we’re talking about the smaller end of financial planners’ client books,” Tracy said.
“The typical JBWere client would be about $3 million to $5 million-plus, so I don’t see them as natural clients who would go into an SMA. This is more [about] where a financial planner can scale up his business.
“We see this [SMAs] as a practice efficiency solution that they can use to scale up their business and start to offer across their mid to bottom end of their client base.”
The paper said 48 per cent of advisers believed SMAs made sense for SMSFs because they allowed investors to see the shares in their portfolio, while 42 per cent believed they provided an efficient way to access professional management.
Furthermore, 32 per cent believed SMAs were more tax effective and 28 per cent said they were lower cost.
A typical SMA charged an average management fee of 0.40 per cent to 0.60 per cent.
