financial advice, Financial Planning, SMSF

Advised SMSFs hit all-time low

SMSF Financial advice Vanguard Investment Trends Irene Guiamatsia

The number of advised SMSFs has dropped to an historical low, with advisers being urged to reconsider how they offer services to existing and new trustees and fund members.

The number of SMSFs using a financial adviser has fallen to a five-year low, with the decline most likely related to the way advisers engage with clients rather than a lack of consumer confidence in their services, according to new research.

The “2024 Vanguard/Investment Trends SMSF Report” found the number of advised SMSFs had fallen to 140,000 in 2024 or 23 per cent of funds, down from 160,000 last year and continuing a decline from 205,000 in 2019.

The report, released today, found the number of non-advised SMSFs was at 475,000, its highest recorded level, and that newly established funds were less likely to use advisers than established ones, with only 17 per cent of new funds drawing upon advice.

Additionally, only 25 per cent of funds without a financial adviser stated they were likely or very likely to seek financial advice in the future, with the chief reasons for not doing so being the ability to manage their own affairs, the perceived high cost of advice or not currently needing help.

Investment Trends head of research Dr Irene Guiamatsia noted the decline in advised funds was in line with the drop in the use of advisers across the general population in the past decade and while cost was an issue, how advisers worked with SMSF clients was becoming an important factor.

“When we talk about advice gaps, trustees say cost is an important barrier to getting advice. It is an issue for 41 per cent of SMSFs, which despite sitting on an average portfolio size of $1.5 million will say they cannot afford advice,” Guiamatsia said.

“But this may be a reflection of the delivery model because when we look at the rest of the [survey respondents’] comments around attitudes towards advice, we find that SMSF trustees are more likely to prefer an engagement model that is of a validator nature.

“They want to work with an adviser to validate their opinions about the investments they want to make or to give a second opinion and collaborate with them.

“This model of engagement is vastly preferred to the delegator model, which is actually the current delivery model.”

She added despite the decline in the adviser population, SMSF advisers are actively pursuing new clients for their specialist advice.

“These type of advisers are reorganising their business models for high net worth and SMSF clients and are putting in the work, but it still comes down to the engagement model, which is not gelling with SMSF members’ needs,” she said.

“The industry needs to think about how to bridge the disconnect that currently exists between what is offered and what investors actually want.”

The report was based on response from 1584 SMSFs conducted by research carried out in February and March of this year.

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