Research shows SMSF trustee and adviser relationships improving

A Vanguard and Investment Trends report shows that satisfaction levels of self-managed superannuation fund (SMSF) trustees with their financial advisers are at record highs since the GFC, with several valuable opportunities and trends identified. The 2014 SMSF Planner Report surveyed almost 500 financial advisers and 4,000 SMSF trustees.

Key findings include:

  • Over the past year, trustees’ satisfaction with advisers has increased, with advisers’ technical skills playing a growing role.
  • The clarity of fees and charges continues to prove challenging.
  • The six-year decline in SMSFs actually using a financial adviser has ended, stabilising at 41 per cent of SMSF trustees having used a financial adviser in the past year.
  • The highest level of interest by SMSF trustees in financial advice is now being observed, since Investment Trends started tracking the numbers in 2009.
  • It is estimated that 286,000 SMSFs have unmet advisory needs that they are willing to pay for, offering advisers an opportunity to expand their services.
  • SMSF trustees are increasingly focused on diversification, with planners responding to this need – 77 per cent (up 10 per cent) of advisers say diversification is a key factor in investment selection for SMSFs.
  • Exchange traded funds (ETFs) are now being used more than ever to enter international markets.

Michael Lovett, Vanguard's head of adviser distribution, explained that the findings show what a significant opportunity lies ahead for any adviser wanting to expand into the SMSF sector, with SMSF trustees very willing to engage the services of a professional financial adviser, particularly with inheritance planning and protection of assets becoming features of successfully handling your own retirement fund.

Lovett says that many elements contribute to the satisfaction of SMSF trustees with their advisers besides investment selection, including technical expertise, tax expertise, quality of support staff and the clarity of the various fees and charges involved in financial advice. The research shows there is a lot of room for growth into specialist SMSF financial advice.

SMSF trustees – the inhibiting factors

The cost of advice is still an inhibiting factor for many investors, but when asked their preferred method of receiving help from an adviser, many more are preferring face-to-face interactions even if it costs more, particularly when compared with 2013 numbers: this year 12 per cent preferred a face-to-face meeting, up seven per cent from last year. Around a fifth of those surveyed, however, indicated that they would be happy to receive advice over the phone and online.

SMSF trustees have several unmet areas of advice, the report explains, with advisers having an opportunity to meet their clients’ needs in more ways than just investment returns – namely, risk control.

Unmet advice needs

SMSFs need to protect their assets against market falls, and trustees are prepared to pay for the advice that achieves this goal. The trustees surveyed said that their top areas of unmet advice needs were inheritance and estate planning (27 per cent), age pension and other entitlements (27 per cent), and SMSF pension strategies (24 per cent). These trustees were prepared to pay up to $2,500 annually for advice that meets their needs, which is another $500 on last year’s numbers.

Diversification priority

In 2014, the report indicated that advisers and SMSF investors want diversified portfolios, since this offers the best protection from risk, while managing returns adequately. Around 27 per cent – up from 14 per cent last year – of SMSF trustees who made significant asset allocation changes were aiming to diversify, which correlates with 77 SMSF advisers noting that diversification was their primary investment priority, up from 67 per cent in 2014.

So where is it all going? Advisers said that they put 31 per cent of new SMSF inflows directly into international markets, up from 25 per cent in 2013 – a not insignificant rise, and a vote of confidence in international markets. This is expected to grow up to 35 per cent over the next year.

Lovett, commenting on the findings, says that, ‘Ultimately, the value of a financial adviser is in their role as a behavioural coach. This involves understanding clients' risk appetite and setting the strategic asset allocation for a client's portfolio.’