Russell keen to fill SMSF education gap

Investor education should be a key focus in addressing the needs of the self-managed super fund (SMSF) sector, according to Russell Investments.

Managing director of retail investment services Patricia Curtin said investor and adviser education were becoming more of an issue as SMSFs become the largest growing segment.

“The SMSF sector is obviously driven by the individual and their [desire] to gain control of the decision-making process and their investment choices,” said Curtin. “They have the confidence in their decision-making ability to get to the end goal. But having the ability to make your own decisions, particularly around investments, isn’t always a well-educated, well-researched position for most individuals because it’s not their core competence.”

She said education becomes all the more important from the standpoint that asset allocation drives 90 per cent of the performance of a portfolio.

“I would say that this whole idea of asset allocation is an area that individual investors, as they are taking greater control of their retirement, need to be concerned about,” said Curtin.

Curtin said a major concern with SMSFs was the high concentration of one or two asset classes.

“There are probably some natural biases that are building up within the SMSF sector, and I would argue that some of those biases are the propensity to invest in local over global,” she said.

Curtin added that a high concentration of Australian equities and cash had stood them in good stead over the last few years.

“But is that the right proposition going forward?” she asked. “Should they be thinking about greater diversification across all asset classes?”

She added that other issues of concern were decisions based on tax benefits rather than investment benefits, and a focus on return over risk in the portfolios. Curtin said that while these may be natural biases, she suggested that it could be due to a lack of knowledge.

Russell is not only keen to release more research in this area, but is working on an SMSF ‘survival kit’ for advisers that will help them fulfil an education role.

Curtin stated that with the increasing opportunities in the sector, Russell aimed to act as an SMSF consultant to dealer groups looking to create better SMSF portfolio construction and product solutions.