Financial Planning

SMSF advice falls as need grows

SMSF financial advice

The number of SMSFs seeking financial advice has dropped as the number of funds and the scope of their advice needs have increased.

The number of SMSF trustees using financial planners and advisers has remained static over the past decade despite a doubling in the amount of funds in that period, with a researcher urging advice providers to reassess their value proposition to trustees.

Investment Trends chief executive Michael Blomfield said the underserviced and unmet advice needs of SMSFs remained a key issue that had been repeatedly identified by the research house since it first examined this issue 13 years ago.

“The number of SMSFs using a financial planner has, since 2007, gone almost nowhere,” Blomfield said, adding that in 2007, 210,000 funds used a financial planner or adviser, but that number had dropped to 190,000 in 2020, during which time the number of SMSFs had grown from 325,000 to 600,000 funds.

“There is a very big advice need that goes unmet. There are now 335,000 SMSF trustees who say they have unmet advice needs in relation to their SMSF and that number has grown year on year,” he said as part of a presentation for the newly released “2020 Vanguard/Investment Trends SMSF Investor and Planner Report”.

He also pointed out advice needs have become more intense and widespread than a year ago when 70,000 funds said they wanted investment strategy advice, compared to 115,000 fund who were now seeking the same type of advice.

When looking at wider investment issues, such as choosing and protecting assets, that figure climbed to 245,000 funds, while tax and income strategies were an issue for 200,000 funds and retirement adequacy was an issue for 115,000 funds, he added.

He said Investment Trends had found that while about 39 per cent of SMSFs overall would prefer to pay for personalised financial advice, that percentage increased when focused on key issues of high relevance to SMSF trustees.

Longevity protection was a key issue in the retiree and pre-retiree space and 49 per cent of SMSF trustees were willing to pay for advice in this area, he pointed out.

“The notion that however much money you have, you have got a fixed lifetime and the length of that lifetime is becoming more concerning with the terrible conundrum of living too long that older Australians are starting to worry about,” he said.

“That kind of issue is what people are much more interested in taking advice for than other issues such as exchange-traded funds or offshore investing.

“Financial advice around trustees and SMSFs is problematic as the use of advice is down while demand is up and the breadth of needs is broadening.

“Planners have a fair bit of work to do to build out their value proposition for SMSF trustees.”

The report was compiled from 3156 trustee responses to a quantitative survey conducted online between February and May.

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