The self-managed super fund (SMSF) sector holds enormous potential for the advice sector, driven by the needs of a middle tier of trustees keen for guidance, according a research report launched by the SMSF Professionals’ Association of Australia (SPAA) and Russell Investments.
The report, compiled by CoreData/brandmanagement, identified three types of SMSF trustees: the ‘controllers’, the ‘coach seekers’ and the ‘outsourcers’. Russell Investments managing director, Patricia Curtin (pictured), said it was the coach seekers that presented the greatest opportunity for the advice sector, since they were likely to have a higher preference for advice. However, Curtin warned, coach seekers wanted more of a mentor relationship, since they would rather do things themselves and were looking for insight from advisers. As such, the advice industry needed to rethink its service offerings, she said.
“This group makes up 30 per cent of the population but only one in four have an SMSF, presenting the biggest growth opportunity,” said Curtin, adding that the research refuted speculation that SMSF sector growth would plateau as one in 10 respondents who did not have an SMSF were likely to set up one in the next two years.
The report also confirmed that the sector was performing well with an average return over the last 12 months of 10.7 per cent per annum for those trustees who made a positive return, representing 98.6 per cent of trustees. However, Curtin said there was room for improvement.
“Some 41 per cent of trustees have no clear investment performance goals and close to one in four rely on gut instinct when forming their investment strategy,” she said. “This presents an excellent opportunity for specialist advisers to work with trustees to overcome these limitations.”
The research also found that trustees maintain high allocations to fixed interest and cash (26.7 per cent) with many waiting for a better investment option (51.9 per cent) or using cash to reduce risk (46.4 per cent).
“Now is the time trustees should be actively considering when they get back into the market and working with their professional advisers on building awareness of what the investment opportunities are out there,” said Curtin.
SPAA chief executive Andrea Slattery said the research also proved that the lowering of the contributions caps had a significant impact, with $15.1 billion less in SMSFs as a result.
“We believe that this legislation is restrictive and prohibitive, and counter to the intent of the Government to have super as the main retirement savings vehicle for Australians,” she said, adding that the SPAA would like to see the contributions caps return to pre-2009 levels.
