financial advice, Financial Planning, SMSF

Online advice driving new set-ups

New SMSF trustees are shunning traditional sources of advice when setting up a new fund, choosing to rely on online information and word of mouth.

The self-directed nature of SMSFs is increasingly being seen in the choices made by new trustees when setting up their fund with online research and word of mouth the leading drivers ahead of input from professional practitioners, according to research from Investment Trends.

The “2024 Vanguard/Investment Trends SMSF Report” released earlier this week found in recent years people looking to establish an SMSF had moved away from traditional sources of information provided by accountants and advisers in favour of that found online or provided by someone with a fund.

Investment Trends head of research Dr Irene Guiamatsia noted the shift was largest in relation to accountants, but financial advisers were impacted by the same overall trend, with the level of unadvised funds at historically high levels.

“Accountants used to be key influencers in the setting up of an SMSF and they still do influence that decision to a degree,” Guiamatsia said, adding that prior to 2006 around 45 per cent of trustees set up an SMSF off the back of advice from an accountant and 13 per cent did so after consulting an adviser.

However, the figures relating to accounting advice fell to around 33 per cent in 2019 and had since fallen to 12 per cent, while those for advisers climbed to 15 per cent by 2019, but have subsequently dropped to around 3 per cent.

“What we find now is those who have set up an SMSF are vastly more influenced by research they carried out themselves online or by word of mouth,” Guiamatsia said.

She said the report found internet-based research as a driver for setting up a fund had risen from 4 per cent of trustees before 2005 to 16 per cent by 2019 and since then had continued to rise to 35 per cent, while word-of-mouth research increased from 11 per cent before 2005 to 28 per cent after 2019.

“Based on this information, it’s fair to say that SMSFs are more than ever self-directed, even from the initial trigger point,” she said.

“We dived a little deeper into what the motivation for these trustees was for setting up an SMSF and the desire for control has remained a universal motivation for setting up a fund, with two-thirds of all trustees stating this was the primary driver.

“For a long period of time property was quite a significant driver and still tends to be so, but we also point out that having greater transparency over the assets in which they invest is a particularly important aspect for those trustees.”

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