Need for generational approach to SMSFs

Advisers need to tailor their advice to clients at a generational level according to the findings of a new report from Macquarie Bank and the SMSF Professionals' Association of Australia Limited (SPAA).

The report, entitled The SMSF Generations Report, revealed that SMSFs are popular with every generation of Australians, however, it also highlighted that there is no such thing as a typical SMSF investor. 

Indeed, there are significant differences in the attitudes, investment priorities and lifestyle aspirations of each age group - a fact which financial advisers needed to be mindful of when delivering advice.

Commenting on the report, Macquarie Banking and Financial Services Group analytics research manager Gary Lembit said that investors across the generations recognised the value of advice when managing their SMSFs, but advisers should tailor their approach according to life stage to have the greatest impact.

"It is clear that one of the main reasons investors opt for an SMSF is to have greater control and choice over their investments," he said. "However, this does not mean they want to be entirely self-directed.

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"As the insights in this report show, SMSF investors across the generations recognise the role financial advisers have to play in providing valuable guidance on their investments," Lembit continued. "However, through better understanding their clients' state of mind, advisers can adapt their advice models and learn to communicate in a way that better meets their needs, while articulating the value they can add."

Interestingly, the combined Macquarie Bank/SPAA research also revealed that while investors shared common reasons for choosing an SMSF, there was a significant difference between how receptive each generation is to receiving financial advice. 

It said that Generation Y generally demonstrated confidence in many aspects of their lives, but when it came to long-term investment decisions, they became less confident than other generations. They are receptive to advice, the report said, but do not seek it. 

Generation X, on the other hand, was said to be a lot more sceptical about financial advice. However, being time poor, they are willing to pay for advice in certain situations, particularly if it helps save time.

Finally, baby boomers were found to be increasingly seeking advice - presumably, due to impending retirement - while the Silent Generation (made up of those Australian already in retirement) was identified as the generation most likely to seek advice.

Accordingly, the chief executive of SPAA, Andrea Slattery, said that as SMSF take-up continued to increase, the industry needed to respond by focusing more on what it could do to best service the sector and its distinct groups.

"We have found time and time again that investors who use SMSFs are the most engaged people in superannuation," she said. "They want to make sure their funds perform well and are interested in understanding what is involved to help make this happen.

"This includes accessing financial advice, which these investors show a continuing appetite for, but as this report has shown, the advice industry can make their role even more effective by tailoring their approach to the stage of life the investor is in," Slattery continued. "We think that through reporting insights like these, we can continue to support the advice industry in its aim of demonstrating its value to investors and helping investors make the most out of their retirement savings through their SMSF."

For Lembit, the key message from the Macquarie Bank / SPAA research was clear.

"By tailoring advice to the different investment styles and decision-making processes of each generation, advisers can build stronger and more fruitful client relationships."