SMSF trustees may be running out of “investable assets” on the Australian Securities Exchange (ASX) that they feel comfortable investing in directly, with the ASX saying it is an issue that must be addressed.
Speaking at the SMSF Association 2017 National Conference in Melbourne last week, ASX head of customer and business development Ian Irvine said direct investors liked to use the ASX because of its transparency, certainty of settlement through the Clearing House Electronic Subregister System (CHESS) and the ease of access through an ASX broker.
However, Irvine said building comfort with SMSF trustees remained a key priority to ensure they could get the most out of the various investment vehicles “on the aisles” of the ASX’s “investment supermarket”.
“SMSF trustees may be running out of ‘investable assets’ on the ASX and this is a problem we don’t want to create for the ASX. We want to provide a solution that they feel comfortable with,” he said.
“They may be running out of those investable assets that they feel comfortable with to ‘go it alone’ and this plays to the story of the emergence of what we’re seeing [in the market]. They need someone to help them.”
He noted advisers had played a critically important role in the stewardship of the ASX mFund Settlement Service for SMSF trustees since 2014, with 60 per cent of the transactions related to the managed funds available on the exchange being conducted with the assistance of an adviser.
Between 80 per cent and 85 per cent of those transactions on the CHESS holding of the mFund service were owned by SMSF trustees, with that recognition appearing in their holding titles, he said.
“Because it’s really small and [relatively] new, [mFund] gives us a real feel for the attitudes and behaviours of investors,” he said.
“It’s surprised us on many fronts, but what’s interesting is that when you take a confident investor away from their comfort zone – quite often buying direct shares – and give them another opportunity or way to expand their horizons and where they may invest, they seek professional help.”
ASX figures showed there was over $600 billion held in SMSFs in Australia, $228 billion of which was invested via the ASX, with a high proportion in large-cap Australian equities.
A total of $157 billion was invested in cash and term deposits, a finding which Irvine said underpinned the lack of diversification in SMSF trustee portfolios.
“If you do the maths on the size of the super industry at large, it is larger than the value of the listed companies on the exchange and that’s the challenge: we’ve got to find other ways to invest, but still retain those benefits that trustees enjoy by using ASX and CHESS,” he added.