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Trustees seek managed fund, strategy guidance

A clear opportunity existed for SMSF advisers to proactively interpret market conditions for their clients, as well as help trustees navigate through new managed funds and investment strategies, a recent industry paper found.

The AMP Capital SMSF Suite “Black Sky Report 2016” aimed to highlight any professional opportunities that existed within the rapidly evolving SMSF category.

The report, based on new research data from Investment Trends, revealed managed funds continued to buck the trend, with 27 per cent of those surveyed looking to invest in more managed funds in the next year, up from 19 per cent in 2015.

It found 51 per cent of all trustees surveyed now used managed funds, while 60 per cent used managed investments, up from 49 per cent in 2015.

Furthermore, 46 per cent of trustees surveyed viewed access to out-of-reach investments as their main reason for investing in managed funds, up from 32 per cent in 2015.

Likewise, 89 per cent of SMSF trustees liked the perceived benefits of access and diversification that managed funds gave them, while 46 per cent said ease and low costs were reasons they intended to invest in managed funds.

“Trustees are telling us they are interested in managed funds as they can hold unique investments that are otherwise unavailable to retail investors, such as global infrastructure and property,” AMP Capital head of self-directed wealth and SMSF Tim Keegan said.

In terms of listed and unlisted managed investments, allocations also increased to 16 per cent compared to 14 per cent last year.

A shift towards diversification was reflected by more funds and products being selected by SMSF investors, as expected, the report said.

On average, SMSF investors intended to invest in 2.8 different types of managed funds, up from 2.6 types of managed funds in 2015.

Another finding was that as SMSF trustees’ appetite for diversification and selecting the right investments increased, their time spent researching and managing their fund actually decreased, with trustees indicating they were spending only 3.4 hours a month on average selecting and researching their SMSF, down 8 per cent from 2015.

“Naturally, [advisers’] time spent immersed in the market, researching products, dealing with compliance, and identifying and understanding market conditions is a luxury many of your clients don’t afford themselves,” the report said.

“For SMSF investors, sifting through constantly changing short-term information, such as daily market activity, can prompt short-sighted decisions.

“However, [advisers’] ability to read market signals and take the medium to long-term view not only removes impulse actions, it can greatly assist trustees with their investment decisions.

“The real opportunity lies in your ability to best share your knowledge of the market with your clients, not only acting as validator, but also guiding clients with supply and interpretation of key data.”

The sizeable shift in asset allocation had also created a strong demand for information and advice in 2016, the report found.

The knowledge gap was due to SMSF investors seeking advice to help navigate them through the unfamiliar territory of new investments, it said.

A formidable 62 per cent of all SMSF trustees surveyed indicated they had “unmet advice needs”.

Furthermore, trustees still cited identifying the right investment as the number one problem with managing their own super.

“This is an opportunity to sit down with SMSF investors and demonstrate your broad knowledge and expertise in the field of diversification and access to out-of-reach assets,” the report said.

“Now more than ever, trustees are open to the possibility of new managed funds and investment strategies.”

A strong theme that emerged was the increasing appetite SMSF investors had for diversification.

Interestingly, the worldwide market volatility in 2015 led to 46 per cent of all AMP Capital trustees making significant changes to their asset allocation in the past 12 months, the report said.

In fact, 30 per cent had opted for increased diversification to avoid exposure, while 30 per cent quoted “a more defensive strategy” as their reason for diversification.

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