ETFs, Financial Planning

Adviser product set evolving

SMSF product advice

Industry research has shown the product sets recommended by SMSF advisers are changing to better suit the advice clients are seeking.

SMSF advisers are changing the product sets they are recommending to their clients to satisfy the different forms of advice they are seeking, the latest research into the sector has shown.

The “2019 Vanguard/Investment Trends Self-managed Super Fund Reports” revealed SMSF advisers are increasingly encouraging their clients to use managed accounts and exchange-traded funds (ETF) at the expense of other, more traditional, investment structures.

“The use of managed accounts has grown quite strongly and the use of ETFs has grown quite strongly, probably really at the expense of unlisted managed funds,” Investment Trends chief executive Michael Blomfield said.

The study indicated SMSF advisers’ use of ETFs as a portion of the investments they had advised upon had jumped from 8 per cent in 2015 to 12 per cent in 2019. Similarly, respondents revealed their use of managed accounts had risen from 4 per cent in 2015 to 9 per cent in 2019.

Conversely, over the same period the percentage of the advised investments participants had allocated to unlisted managed funds had dropped from 33 per cent to 29 per cent.

“Part of the reason for that is they feel that [these types of investments] give them more flexibility to work in that asset allocation mode,” Blomfield noted.

“So when they want to change their mind and they want to make an allocation, for example, to fixed income, then they can do that through a couple of trades in the market and they don’t have to redeem and apply through an application process.

“And whether you’re a planner who specialises in giving advice to SMSFs or whether you’re just a generalist, the use of products is very different.”

To this point, in 2019 SMSF specialist advisers recommended more direct share (25 per cent) and ETF (17 per cent) investments compared to their generalist counterparts who allocated 19 per cent to direct shares and 10 per cent to ETFs.

By contrast, generalist advisers channelled 24 per cent of client investments toward active unlisted managed funds, while only 13 per cent of the investments SMSF specialists advised on went to these offerings.

The study showed this difference was set to continue in future years, with SMSF specialists anticipating 20 per cent of investments they advised on going to ETFs in 2020 and generalists saying 13 per cent of their SMSF money under advice would be directed toward this type of investment structure in the same year.

The report also indicated there are unmet advice needs among SMSF trustees that are increasing.

The research was based on the responses of 286 SMSF planners via an online survey conducted between February and April.

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