Less affluent SMSFs are turning to automated investing and are more likely to put all their assets into a robo-advice platform, according to robo-adviser Six Park.
Based on an analysis of member portfolios, SMSFs on the Six Park platform were turning to robo-advice in response to underperforming actively managed funds.
The analysis found SMSFs who used Six Park also invested elsewhere, however, smaller SMSFs were more inclined to put all their assets into an automated advice platform.
A key reason for using an automated platform was to have part or all of the superannuation fund properly diversified with low fees and growing for the long term, particularly in the current low-rate, low-return environment, it said.
In addition, the early adopters included high net worth individuals putting reasonable portions of their investable assets on the platform.
“For traditional wealth managers and accountants, distribution and compliance costs for smaller accounts can be a challenge,” Six Park chief executive Patrick Garrett said today.
“Robo-advice offers an opportunity for them to produce compliant statements of advice, build a better customer experience and to effectively service a less affluent customer base, which has great appeal given the 80 per cent of unadvised investors in the market.
“We’ve had really positive feedback from SMSF trustees who appreciate our investment methodology and transparency, and have seen the power of portfolio diversification during market turbulence.
“Half of our clients are SMSFs and a number have continued to add funds to their accounts.”
Garrett said part of the adoption rate of robo-advisers had to do with trusting the offering.
“Many of our clients have tested the waters and once that sense of trust is established, they start expanding their account when they experience the benefits of the automated, user-friendly service,” he noted.
Six Park uses exchange-traded funds to provide easy diversification to a variety of asset classes.
“ATO data suggests that smaller SMSFs are poorly diversified, typically concentrated almost entirely in Australian equities and cash,” Garrett said.
“We’ve seen a number of such small accounts invest most of their investable assets via Six Park due to our ability to provide prudent investment diversification.
“As a result, they often quickly increase SMSF contributions to their accounts.
“[Meanwhile] high net worth clients with SMSF accounts often use Six Park as a core portion of their investment strategy whilst holding other satellite investments.”
Six Park was launched in May following a year of beta testing.
The automated platform was designed for all kinds of users, including advised and non-advised SMSFs.
It allows investors to create their own professionally managed, globally diversified portfolio at a low cost, charging less than 1 per cent in annual fees while tailoring risk to individual circumstances.
Last week, Australian fintech start-up the Accountants Scaled Advice Program (ASAP) launched its digital financial advisory platform service, designed specifically for the needs of SMSFs and their accountants.