financial advice, Investments

Return band offers opportunity

SMSF returns

Financial advisers can significantly improve the performance of SMSFs they service through the implementation of fundamental investment principles.

The wide distribution or range of returns recorded by the SMSF sector revealed by an extensive study into the sector conducted earlier this year reflects an opportunity for practitioners to make a significant difference to clients who run their own retirement savings vehicle, a senior industry executive has said.

The results of the “Understanding self-managed super fund performance” report conducted by the University of Adelaide International Centre for Financial Services on behalf of the SMSF Association, and released in February, showed the returns of SMSFs in 2019 ranged from -5 per cent to 21 per cent. The study indicated the highest number of SMSFs, approximately 8 per cent, in the sample size of around 220,000 enjoying a 7 per cent rate of return.

By comparison, the research found the majority of Australian Prudential Regulation Authority (APRA)-regulated funds, approximately 58 per cent, experienced a return of just under this 7 per cent mark.

“[The results show] SMSFs [experience], and this is not surprising I don’t think, a much broader distribution of returns. When I look at that [finding] I see [advice] opportunities,” SMSF Association deputy chief executive and director of policy and education Peter Burgess told delegates at last week’s Financial Planning Association of Australia 2022 National Professionals Congress held in Sydney.

“Opportunities at one end [are to enable SMSFs] to outperform. [That means] using the investment flexibility available in self-managed super funds to achieve [higher] returns – to add value as an adviser and achieve a return that exceeds what [the members] would have got in an APRA fund.

“There are also opportunities here for those at the other end of the scale that are underperforming, who are perhaps not seeking advice, to help those clients who have self-managed super funds to improve their performance.”

According to Burgess, advisers need only impart better practices around some of the fundamental principles of investing to make a difference.

“We know that one of the biggest contributors to performance in this research was diversification,” he noted.

“So there are some opportunities for advisers at both ends and [the report] clearly shows outperformance can be achieved using an SMSF.”

During the same session he announced the introduction of an express pathway to the SMSF specialist advisor designation for practitioners who are certified financial planners.

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