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Investment return motivation on the rise

SMSF investment returns

SMSF establishments have increasingly been triggered by the desire to achieve better investment returns over the past six-year period

The desire to achieve better investment returns has taken on significantly more importance as a motivating factor for individuals to set up an SMSF over the past six years, the latest industry research has shown.

According to the “Vanguard/Investment Trends 2021 SMSF Investor Report”, 51 per cent of trustees cited the goal of achieving better returns as the reason why they decided to run their own super fund between 2015 and 2021.

This compares to 41 per cent of trustees nominating this factor as the reason why they established an SMSF in the years spanning 2006 to 2014.

“Achieving better returns was much less of a driver decades ago, but in the past five to six years has become quite an important reason for why people [set up an SMSF],” Investment Trends head of research Irene Guiamatsia noted.

“So about 50 per cent of SMSFs are saying that they are actually moving away from their super funds or rather setting up their SMSF in order to achieve better returns.”

Despite this shift in sentiment, the study indicated the ability to have greater control over their investments was still clearly the main reason why people establish an SMSF, with 71 per cent of those surveyed expressing this sentiment between 2015 and 2021.

This result remained consistent with previous years with 74 per cent of individuals nominating this as their motivation for running their own retirement savings vehicle for the period covering 2006 and 2014.

“Other reasons [for setting up an SMSF] were around making better investments than [other] super funds (32 per cent) and also [the opportunity of] investing in property (31 per cent),” Guiamatsia observed.

Also reflected in the research was the declining appeal of tax considerations and recommendations from accountants as reasons to start an SMSF.

Responses showed 16 per cent of people said they established an SMSF because it was a more tax-effective investment vehicle over the six years between 2015 and 2021, down from 22 per cent across 2006 and 2014, and 12 per cent indicated they set up their SMSF due to advice from their accountant over the years 2015 to 2021, a drop from 16 per cent during the years from 2006 to 2014.

The “Vanguard/Investment Trends 2021 SMSF Investor Report” analysed the responses from an online survey conducted between March and April that gathered feedback from 2523 trustees.

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