Self-managed superannuation fund (SMSF) trustees are beginning to acknowledge the need for professional investment advisers as the existence of a gap in their retirement savings emerges.
Russell Investments individual customers managing director Geoff Peck said in light of the shift in attitudes from SMSF trustees taking an individual approach to their finances, the demand for quality financial advisers was on the rise.
“There is a growing acknowledgement by SMSF trustees that they have a retirement gap and that’s good,” Peck told an audience at last week’s Russell Australia Investment Summit in Sydney.
“They do understand that they don’t actually have enough money in their SMSFs nor are they on track to deliver the amount of money they need to fund their retirement goals.”
In addressing the session “The changing role of SMSFs”, he quoted findings of the latest Russell SMSF report which found advisers admitted one-third of their SMSF trustee clients did not use them for investment strategies.
“They are using advisers for implementation, for satellites, for turbo-charging bits and pieces, but the core strategies are run by the SMSF trustee themselves,” he said.
“Another thing that has come through in the survey is that SMSF trustees now claim that the hardest thing involved in running their SMSF is finding a good professional investment adviser.”
He said the research found a “clear interest and demand for advisers in this space”.
SMSF trustees were also looking for strategic advice from investment professionals, rather than product advice, he said.
In terms of other changes to the SMSF sector, he forecast that more funds would emerge, there would be a greater focus on financial literacy and further regulatory change.
“We do see that there will be a continuing exodus out of some of the more traditional public offer superannuation arrangements towards SMSFs. So this tide is not going away; this is not a fad,” he said.
“We also see that financial literacy is a continual issue. ASIC and the government have identified this as an issue for the entire population, and hence they are starting to do things like introduce financial literacy into the schools program.
“Legislative change around the superannuation industry clearly creates uncertainty and that again creates opportunity for advisers.”
Russell Investments SMSF development manager Eric Quak offered further insight around changes to the sector, stating the changing generational attitudes would also provide opportunity for advisers.
“There is a generational change that’s occurring at the moment with more and more investors embracing the SMSF structure and control and flexibility that those structures offer,” Quak said.
“But moving forward, however, the younger generation – the Xers and the Yers – will look to also continue that control and flexibility that an SMSF offers and further embrace the SMSF structure.”
He said with the acceptance from the general public, the industry also had to move with the times.
“The industry is slowly coming to terms that no one institution actually controls that SMSF sector,” he said.
At present there was a shift in power away from the banks, life offices and corporates into the hands of mums and dads, he said.
“We see them [banks and corporates] taking non-traditional methods in order to retain market share, such as acquiring SMSF administrative businesses,” he said, possibly making reference to AMP’s purchase of Cavendish Group last month.
“As time goes on, both industry and the general population is accepting SMSFs and becoming more mainstream, however, ongoing regulatory change is actually hindering some of the success.”
In his view, Quak said it was probably fair to say regulatory change for SMSFs was going to continue.
