A shift in trustee attitudes

Grant Abbot

Grant Abbott

It is no secret that the members of the Australian SMSF Members Association (ASMA) like to have their voices heard. With an upcoming election and superannuation set to play a pivotal policy role in the next decade or more, ASMA members have made it clear they want policymakers to consider their position and ensure their status as self-funded retirees is protected.

Apart from our own internal research, we have partnered with CoreData to further identify the needs of our members and the broader SMSF community. To that end, ASMA and CoreData recently sent out an extensive survey to our membership and we received some great results, particularly in relation to reasons for forming an SMSF, the differing profiles of SMSF members, upcoming changes in asset allocation and concerns about government policy. Below is an overview of the survey results.

Why form an SMSF?

There is a range of reasons for forming an SMSF. The standout reason has been that individuals and their partners are looking for greater control over their investments, but also disenfranchisement with current providers is crucial. Importantly, many are not seeking out SMSFs directly, but are looking to move away from the institutionalised superannuation environment offered by industry and retail super funds. Surprisingly, the ability to borrow featured relatively low down on the scale and may also reflect the assistant commissioner of taxation Stuart Forsyth’s statistics, which show that despite all the hype, the number of funds taking up the borrowing mantle is still very low.

SMSF membership profiles – asset size leads to control

The research shows the more an SMSF has, the more the members want control. For those with $500,000 or less, control is not so much an issue. Their main driver is to ensure the fund does what they want it to do, and for that there is a great need for advice, however, not holistic advice, which was the buzz word of the past decade, but rather transactional advice or even an SMSF coach or trainer.

The research also shows priorities change in a whole range of areas in line with financial control. A few examples in this regard include investment knowledge, risk appetite and SMSF size, all of which can tend to increase in line with the preference for financial control.

SMSF asset allocation

Asset allocation of SMSFs continues to be an area of interest when compared to non-SMSFs. The ASMA-CoreData results point towards a significant exposure within SMSFs to Australian equities, cash and term deposits, and residential property. Australian equities is the largest exposure at 49.7 per cent for the overall SMSF trustee universe and 35.2 per cent for SMSF trustees advised by financial planners.

The study shows clear differences in asset allocation between SMSFs as a whole and those that are advised. Advised SMSFs tend to have some more diversity in terms of sector weights, with higher allocation to international shares, fixed income and residential property.

Cash and term deposits look set for reductions

The recent reduction in cash rates to record levels by the Reserve Bank of Australia appears to be giving SMSF trustees cause to consider shifting some funds to other sectors. The interest in shifting from cash and term deposits is more evident in the group of advised SMSF trustees, although all SMSF trustees are also considering moves.

Key sectors identified for increased sector allocations include Australian equities (56.8 per cent of advised SMSF trustees and 34.5 per cent for all SMSF trustees) and international equities (50 per cent of advised SMSF trustees and 30.6 per cent of all SMSF trustees). Within international equities, as over 50 per cent of SMSF members who invest in international shares indicate they use managed funds, this increased allocation may represent an opportunity for international fund managers.

Concerns about government policy changes

Following on from our last article, which commented on ASMA members clearly voicing their opinions on continuous changes in the legal and superannuation environment, the area clearly on the minds of SMSF trustees is potential government policy change, with 70 per cent of respondents expressing high or very high levels of concern in relation to changes.

Upcoming ASMA/CoreData awards

ASMA and CoreData are teaming up to present awards to the leading service providers to SMSFs across investment and non-investment categories. We look forward to providing these results in the near future.

Copyright © SMS Magazine 2020

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital