Andrea Slattery

The profile of self managed super fund (SMSF) investors is dramatically evolving, which means SMSF professionals need to quickly adapt their advice models to meet the different needs of this growing sector of investors, according to the findings of a new study from Macquarie Bank and the SMSF Professionals’ Association of Australia (SPAA).

“This is something we at SPAA have always known, but this research breaks another anecdotal misconception,” SPAA CEO Andrea Slattery says.

The Active Management Report revealed that 46 per cent of recent[i] SMSF investors are under the age of 30 and one in five are females who still live at home with one or more parents. Macquarie and SPAA say this strongly indicates that SMSFs are being considered and set up by people with a very different profile to traditional SMSF investors.

Macquarie Bank’s Analytics Insights Manager, Gary Lembit, says the younger generation in particular is becoming more engaged and with SMSFs often involving family members, SMSF management is very much a family affair.

“As we are aware, high property prices are making it a real challenge for young Australians to enter the housing market and this is one of the main reasons why adult children are staying at home for longer. It is also encouraging them to think about where else to invest their money so they are building their wealth for the future, and of course, retirement,” Mr Lembit says.

“Actively managing an SMSF for many investors means engaging other family members and involving them not only in the decision-making, but also in the ongoing monitoring, reviewing and planning of the SMSF. It is therefore important for SMSF professionals to involve family members in the advice process.”

The study revealed some interesting differences between current and intending SMSF and non-SMSF investors. Current and intending SMSF investors tend to be more purposeful in their financial behaviour and are constantly striving to benefit their families financially in the long-term. Compared to non-SMSF investors, both current and intending SMSF investors are more likely to save as much as they can, with two in three intending investors saying they save as much as possible. Recent investors (60 per cent) and intending investors (63 per cent) are also highly likely to seek out ways to earn more, with intending investors particularly likely to work multiple jobs (31 per cent). Meanwhile, established investors are more likely to invest spare cash, which is further evidence of active money management. SMSF investors, in particular intending investors (nearly one in four), also say they ‘love experts’ more than non-SMSF investors.

Mrs Slattery says these findings confirm that SMSF investors take an active role in managing their investments from day-to-day and an active role in their savings and future retirement plans.

“Having made the decision to set up an SMSF to have more control and choice over their investments, it is not surprising that SMSF investors are highly engaged and informed,” Mrs Slattery says.

“But what is not surprising is this engagement is manifested both in a tendency to actively monitor the performance of their portfolios and to take positive actions to enhance that performance. As a result, they have greater advice needs than other investors and a higher propensity to seek out and value advice. The encouraging news for SMSF professionals is that SMSF investors love experts so there is a real opportunity for them to demonstrate the value they can add, in the knowledge that their clients will be very open to receiving their advice. This is the message we have been putting to the market and this research supports it.

In addition to having revealed that SMSF investors have a hunger for interaction with the experts, the study also confirmed SMSF investors are far more likely to discuss investing and wealth with their family than non-SMSFs. Intending investors are particularly active in discussing their finances, including day-to-day financial management (55 per cent) and financial worries (63 per cent). Only 30 per cent of recent investors say they frequently discuss financial worries. Meanwhile, established investors are more likely to talk about topics like charitable giving (41 per cent) and organ donation (37 per cent), indicating an interest in planning for the future that extends beyond their finances.

Just as they are active in their conversations regarding their wealth, SMSF investors have remained active in their investments. In recent years, SMSF investors have allocated more of their investments towards direct equities, while direct property has continued to grow in importance as an asset class[ii].

“What this study shows is that SMSF investors share some common traits which allow SMSF professionals to proactively engage this inquisitive and collaborative group. But there are also some noticeable differences at each stage of the SMSF lifecycle, which means that if SMSF professionals can demonstrate that they understand the distinct needs of SMSF investors then they can build higher quality client relationships and better service the demands of this increasingly important sector,” Mr Lembit says.

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