Direct property and direct overseas equities are the two growing areas of interest for self-managed superannuation funds (SMSF), according to a boutique investment manager.
Instreet Investment managing director George Lucas said that five years ago, only about 5 per cent of financial planners asked about direct investment in residential property, whereas now about 20 per cent of planners were inquiring.
“Five years ago, one in 20 independent financial advisers asked about direct property investment” via an SMSF, Lucas said.
He said five years ago, “direct investment in residential property via an SMSF was seen as ‘shonky'”.
“It wasn’t a mainstream asset class such as government bonds or cash,” he said.
“Now, it’s one in five. This is the biggest shift I’ve seen. One reason is that it’s not valued as often, so it’s not subject to the same fluctuations as other assets.”
In the global financial crisis (GFC), property was talked down 30 per cent, he said. “Yes, it may have gone down in some parts of Australia, but in the overall Sydney market, rental vacancies have only gone down by 1 to 1.5 per cent,” he said.
“Another reason for direct property’s rise is that it’s not a financial product, and therefore it’s not under FOFA (Future of Financial Advice). Long-term, property is a good asset, a hedge against inflation, and it’s an investment in Australia.”
The second area, direct overseas equities, would grow as an asset class in SMSFs in the next five years, he said.
“Advisers are anecdotally saying that clients are returning to them after the 2009-10 GFC. They’ve had three to four years of trying to look after their SMSF, and they’re realising it’s quite hard to do. People go to advisers because they want to take risks,” he said.
He said he had noticed manifestations of ‘the FOFA effect’. People had been waiting for FOFA to come in “so they feel safe about more compliance”, he said.
He said there had been some “bad apples” in financial planning, but there were also “rotten apples” in professions such as medicine, law and accounting.
“The government’s own agenda for FOFA was to get financial advice on people’s agenda. That’s what FOFA was meant to do – to help people feel comfortable about seeing a financial planner,” he said.
