SMSFs rank control over performance

Control is the determining factor for SMSFs.

People in SMSFs pay little heed to the performance of their fund and prioritise control, and this is reflected in the composition of their portfolios, according to Bell Direct.

Bell Direct chief executive Arnie Selvarajah told the recent Class Connect 2018 conference in Sydney the motivating factor for those establishing an SMSF is control.

“What’s really interesting is if you segment their customer base and understand who actually creates SMSFs, generally they are people who are in small business,” Selvarajah said.

“[There is a] very big correlation between people who are in SMSFs and people who are in small business. That’s generally driven by the fact they want control. They want control over their business life and they now want control over their investments and their superannuation.”

That is the conversation they are having with their accountants, which is how they learn about SMSFs in the first instance, he added.

“So I don’t think performance is actually the determining factor for SMSFs. It’s really about control and transparency and cost,” he said.

Bell Direct has multiple segments of clients, including advised SMSFs and independent financial advisers, he noted.

He said the construct of non-advised SMSF portfolios is considerably different to advised SMSFs. The non-advised SMSFs have about 83 per cent of their portfolios in direct equities, while those in the advised segment have just over 60 per cent of their portfolios in direct equities.

“And the difference is really in ETFs [exchange-traded funds] and hybrids,” Selvarajah said.

“The advised SMSFs hold a substantially higher proportion of ETFs and managed funds and hybrids, whereas the non-advised will have probably a higher proportion of ETFs, but not very much in hybrids or in managed funds.

“So it’s very much a direct equity focus for the non-advised SMSF.”

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