Renae Smith

The 2025 Vanguard/Investment Trends Self Managed Super Fund (SMSF) Report has found that trustees of newly established SMSFs have been behind a surge in the uptake of financial advice across the SMSF sector.

The 20^th annual edition of the report, released today, shows adviser influence is growing in new SMSF set-ups, although the broader SMSF population still has significant advice needs.

The total number of SMSFs climbed from 612,000 at the end of 2023 to a record 638,000 by the end of 2024 following the creation of 25,969 new funds. The combined assets from the new funds, along with strong investment gains over the period, helped lift total SMSF assets to more than $1 trillion for the first time.

The Vanguard/Investment Trends research found that SMSF set-up interest is rebounding, with industry fund members showing slightly higher intent – driven more by perceptions around performance than their retail peers.

Of the total SMSF inflows in 2024, 57% reflected rollovers from industry super funds and a further 23% rollovers from retail funds.

The top motivations cited for setting up an SMSF were more control over investments (65%), achieving better returns (38%), and having greater transparency of investments (31%).

However, many of those who have set up an SMSF noted they still have a separate super account alongside their own fund, which is primarily to access cheaper insurance coverage, for diversification purposes, and in case they decide to switch back their super in the future.

Significant advice gaps

The number of SMSFs using financial advisers grew to 155,000 in 2024, up from 140,000 in 2023. But this means 483,000 SMSFs – the vast bulk of the sector – are not using a financial adviser.

“Although Australia’s SMSF sector is continuing to grow, the research for this year’s report clearly highlights that there are significant advice gaps for many individuals operating their own super fund,” said Renae Smith, Chief of Personal Investor, Vanguard Australia.

“Only 24% of SMSFs currently use a financial adviser, which is not ideal when you think of the many complexities associated with managing superannuation including keeping track of changes in rules and regulations, administration, taxes, choosing what to invest in, and then personal considerations such as retirement income needs and estate planning.”

The latest research found that advised SMSFs are more likely to report advice gaps around intergenerational wealth transfers (29%) and estate planning (37%), while newly established SMSFs are far more focused on tax minimisation (37%), insurance (26%), and purchasing an investment property (25%). Tax and retirement planning represent the largest cluster of unmet needs, impacting 280,000 SMSFs. 

Barriers to closing the advice gap remain complex. Among advised SMSFs, a lack of holistic advice is increasingly cited (23%, up from 16%), while cost (33%) stands out as the primary hurdle for newly established SMSFs.

“On the bright side, the research found that 34% of unadvised SMSFs now plan to seek financial advice, which is up from 25% the year before,” Ms. Smith said. “But this percentage needs to grow. Vanguard has long been a proponent for the value of financial advice and the benefits it can deliver and has strongly advocated for Australians to have easier access to affordable advice solutions.”

The latest research found that many SMSFs are open to receiving digital advice, highlighting the enormous scope for delivery of scalable, low-touch solutions.

Asset allocation trends

Almost half of SMSFs now have over $1 million in assets and account for 84% of total SMSF sector assets. 

New SMSFs started with higher average balances in 2024 ($430,000, up from $410,000 in 2023), with total SMSF inflows increasing to $7 billion, up from $5.2 billion in 2023. 

Amid a sharp decline in market outlook, most SMSFs are staying the course but some have undertaken deeper portfolio recalibrations, shifting toward exchange traded funds (ETFs) and stocks.

 ETF allocations have surged to a record high of 12%, up from 9% in 2024, with 315,000 SMSFs now holding at least one ETF in their portfolio.

The research found that 230,000 SMSFs intend to reinvest in ETFs in the next 12 months and a further 65,000 plan to make their first ETF investment in the next year. 

The uptake of ETFs has been particularly strong among newly established SMSFs (61% use), comprising 31% of those portfolios. By contrast, retirees have a relatively high allocation to direct shares (41% of their SMSFs on average). 

“Vanguard’s research shows that a growing number of Australian investors including SMSF trustees are adopting ETFs, while a high percentage of financial advisers are using ETFs as a core offering to their clients,” Ms. Smith said. 

Additional key findings

• The proportion of SMSFs making substantial asset allocation changes (more than 10% of the fund) was steady year-on-year (34% in 2024 versus 33% in 2023). However, the magnitude of those changes increased on average, with those trustees having made a substantial change changing 27% of their fund, up from 24%.
• Across the SMSF sector, 39% of advised SMSFs made substantial asset allocation changes versus 32% for non-advised SMSFs.
• Fewer SMSF retirees are prioritising ‘building a sustainable income stream’ (34%, down from 37%), shifting instead toward capital preservation amid growing market uncertainty (14% adopting a defensive strategy, while 30% opt for balance) –signalling a willingness to recalibrate their retirement strategies.
• Listed investments make up 55% of the average SMSF portfolio, with non-advised trustees allocating even more (58%).
• SMSF portfolios remain heavily exposed to direct shares (37% on average), a preference trustees have reaffirmed over the past year (up from 30% in 2024). Their average investment in direct shares is $450,000.
• Cash remains an important liquidity anchor and represents approximately 15% of SMSF portfolios, however cash holdings fell to a 10-year low. Advised SMSFs tend to allocate slightly more to cash than their non advised counterparts.
• Many SMSF trustees also have substantial investment holdings outside of their super fund. In fact, 60% hold direct shares, 51% have cash holdings, 39% own direct property, and 30% have ETF holdings as non-SMSF investments.
• By weighted value, non-SMSF direct property accounts for 39% of assets, followed by direct shares (22%), cash products (15%), and ETFs (6%).

About the report

Vanguard has partnered with Investment Trends to release the SMSF Trustee report for 12 years. The 2025 report surveyed more than 1,500 SMSF trustees and offers the most comprehensive analysis of this growing sector of the Australian superannuation system, with an ongoing objective of growing the industry’s understanding of this important segment of Australia’s superannuation industry.

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Balaji Gopal

In a reversal from last year, SMSF trustees intend to increase their allocation to equities and decrease their allocation to cash in the current low-rate environment, according to the 2021 Vanguard/Investment Trends SMSF Investor Report launched last week.

Some 49 per cent of SMSFs who want to decrease their cash allocation cited cash as a poor investment considering record low interest rates. Forty per cent also believe they must invest outside of cash to generate a steady income stream, a concern that remains top of mind for SMSFs.

“Many SMSFs have traditionally relied on the yield generated from their investments to provide income during retirement. Unfortunately, with interest rates expected to remain low for the next year at least, cash investments are unlikely to produce the desired level of income,” said Balaji Gopal, Head of Personal Investor at Vanguard Australia.

“Instead, SMSFs are looking to invest more in equities or income yielding assets like property to make up for the shortfall”.

SMSFs’ appetite for growth-oriented investments is also returning because of their increasing optimism that markets will experience steady growth as economies recover from the pandemic.

More than 60 per cent of trustees surveyed said they had a positive outlook on Australian shares, and almost 50 per cent said they had a positive outlook on international shares.

This bullish sentiment is also reflected in SMSFs’ increased dividend yield expectations for the next 12 months, with their dividend yield expectations recovering to pre-pandemic levels (4.2 per cent in April 2021 vs. 4.3 per cent in April 2019, on average).

Additionally, SMSFs pursuing portfolio growth are also more willing to invest in ETFs and small cap and speculative shares in 2021 than they were in 2020.

Mr Gopal said: “The shift in asset allocation to a more aggressive stance is understandable given current market conditions, but SMSFs must consider their risk tolerance and remember the role that defensive assets, like bonds, play in a diversified portfolio before significantly altering their investments.

“Recent Vanguard research showed that investors would have to be 100 per cent allocated to equities to produce the dividends needed to support most income requirements. This significantly elevates a SMSF’s portfolio risk – buoyed up even higher if they’re invested in speculative shares that can experience large price fluctuations.

“An alternative investment strategy suited to low-yield environments is a total returns approach, where investors utilise both income and capital growth elements of their portfolio to support their spending needs”.

Strong appetite for ESG investing

SMSFs are eager to increase their allocation to ESG investments if it generates positive returns, but there exist several barriers to ESG adoption.

SMSFs’ uptake of ESG products is predominantly determined by whether or not they believe ESG investment can deliver comparable returns to incumbent products.

While the majority (54 per cent) of SMSFs surveyed believe returns from ESG investments will be similar to non-ESG investments, 22 per cent believe returns will be worse.

Almost half of SMSFs would only consider ESG investments if they offered better returns, while 39 per cent of trustees are not willing to accept potential lower returns even if the fund generates a positive social or environmental outcome.

There is also a lack of awareness among SMSFs of ESG products, with 21 per cent citing lack of knowledge as a barrier to ESG investing, and 18 per cent citing lack of tools and research to identify and compare ESG products as another.

“This year’s survey reveals that while there is certainly appetite for ESG investments, the industry still has a way to go to improve SMSFs’ awareness and understanding of such products,” said Mr Gopal.

SMSF market overview

Total SMSF assets have rebounded to an all-time high of A$787b in March 2021 following COVID-induced losses last year (A$694b in March 2020).

The total number of SMSFs also continues to grow, with some 597k SMSFs established as of March 2021, despite the annual rate of establishment at decade lows.

SMSFs trustees are also getting younger, with the average age falling from 48 to 46 years old.

“SMSFs are now no longer just the realm of older investors. Younger investors are setting up SMSFs with smaller account balances and appreciating more the investment control and return opportunities that SMSFs can offer,” said Robin Bowerman, Head of Corporate Affairs at Vanguard Australia.

However, 44 per cent of potential SMSF trustees still intend to keep their APRA regulated super fund as contributions are still paid into this account and as a back-up in case they change their mind.

SMSFs and financial advice

COVID uncertainty ignited a significant shift in SMSF attitudes towards financial advice, with more trustees willing to seek professional advice than they did before the pandemic.

This, however, has not translated into increased adoption of advice, as the number of SMSFs using financial planners continue to slide.

Positively, overall satisfaction with financial planners has increased slightly since last year from a composite score of 69 per cent to 71 per cent, particularly when it comes to tax advice or technical expertise.

“Opportunities remain for advisers to demonstrate the value they can offer SMSFs, especially in areas such as SMSF pension and contribution strategies, as well as estate planning where there exists an advice gap,” said Mr Bowerman.

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Robin Bowerman

Despite return and yield concerns during the peak of COVID-19 induced volatility, self-managed superannuation fund (SMSF) trustees are optimistic about market recovery, according to the 2020 Vanguard/Investment Trends SMSF investor report launched last week.

This year’s report surveyed over 3000 SMSF trustees on their investment priorities and industry outlook providing an insight into how trustees navigated through the volatility caused by the global pandemic.

While the SMSF market continues to grow, the impact of COVID-19 and subsequent macroeconomic uncertainty appears to have exacerbated the slowing rate of new SMSF establishment.

The size of the SMSF market now represents one-quarter of the Australian superannuation industry and currently sits at A$676 billion, a two-year low.

Greater control over investments remains the main reason investors set up new SMSFs however more trustees than ever are also maintaining their existing super fund.

Record switch to defensive assets

As a result of the extreme market uncertainty this year, nearly half of SMSF trustees surveyed made substantial changes to their asset allocation.

Some 55 per cent of SMSF trustees took a more defensive stance and increased their cash and property allocations, driven primarily by a negative outlook on both domestic and international equities.

Exposure to direct shares declined in line with the market sell-off in Q1 2020. On average, direct shares now comprise 31 per cent of SMSF portfolios, decreasing four per cent year on year and reaching levels last seen in 2009 post Global Financial Crisis.

One-third of SMSF trustees have fixed income exposure within their portfolios, with hybrid securities remaining the most popular product despite more investors turning to direct bonds and ETFs.

Although SMSFs have a desire to used fixed income products to diversify their portfolios and achieve a sustainable income, there is a lack of understanding of what constitutes a true fixed income product and the fundamental role they play within a portfolio.

“Investors should want their defensive assets to be truly defensive, especially when the market swings as wildly as it did earlier this year. Hybrid securities do not provide the same level of safe-harbor stability as high-quality bonds do as they still have equity-like features, and in times of market stress may not provide true diversification across asset classes,” said Robin Bowerman, Head of Corporate Affairs at Vanguard Australia.

“As ASIC warned in its May 2020 report on retail trading activity, investors are taking more risk in the fixed income space as a result of low interest rates and declining yields. For a better chance at securing steady retirement income and safeguarding returns in periods of volatility, SMSF trustees need meaningful portfolio diversification.”

Yield concerns

Findings also show that SMSFs’ dividend yield expectations have dropped from 4.8 per cent pre COVID-19 outbreak to 3.6 per cent.

“For pension phase SMSF trustees, who make up nearly half of all SMSF investors in Australia, these are very unsettling times with real concern about low yields and returns and how that will impact portfolio income,” said Mr Bowerman.

“Rather than focusing on an income-oriented strategy, a total-return approach – where an investor makes withdrawals from the full return of their portfolio – coupled with a spending strategy, can assist investors to take back control of their income stream”.

Optimistic on recovery, but still lacking in advice

Despite wavering confidence earlier in the year, SMSF trustees are relatively optimistic about market returns going forward.

More than ever, SMSFs are focused on maximising capital growth.

In the short-term, SMSFs show significant appetite to rotate back into equities with 37 per cent of trustees willing to increase their allocation to Australian shares, and 23 per cent to increase investment in international shares.

There is still a strong and growing preference for blue-chip shares and considerable appetite for ETFs and international shares.

The number of SMSFs with unmet advice needs continues to grow, with investment strategy review and pension strategy advice most sought after in these uncertain times.

Vanguard Personal Investor SMSF offer

Launched in early April 2020, Vanguard’s new Personal Investor offer delivers on Vanguard’s ongoing promise to lower the cost of investing by providing retail investors, including SMSFs, direct access to a wide range of Vanguard’s low-cost managed funds at wholesale rates and its Australian-listed exchange traded funds (ETFs) brokerage free.

Investors are also able to trade the top ASX shares by market capitalisation at $19.95 or 0.15% per trade (whichever is greater) and have access to an interest earning Vanguard Cash Account.

“We are excited to have seen more than 8,000 new account holders take up our new digital platform since we launched in April this year in the thick of the COVID-19 pandemic”, said Balaji Gopal, Head of Vanguard Personal Investor.

“Vanguard Personal Investor goes beyond a traditional brokerage account, designed to assist investors through functionality that promotes diversified, long term investing rather than short term trading – one of our enduring principles for investing success.”

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Rebecca Pope

While over 70 per cent of self-managed superannuation fund (SMSF) trustees are satisfied with their financial planner, a large and growing proportion of SMSFs still have unmet advice needs, according to the 2020 Vanguard/Investment Trends SMSF Planner report launched yesterday.

This year’s report surveyed over 3000 SMSF trustees and almost 200 financial planners on their investment priorities and industry outlook, and provides an insight into the opportunities and challenges facing the SMSF advice market.

SMSFs’ views on financial advice

While the number of SMSFs using some form of financial adviser has remained largely steady over the last 12 months, the use of financial planners has fallen from 215,000 to 190,000 in 2020.

Faced with heightened uncertainty due to the COVID-19 outbreak, the number of SMSFs with unmet advice needs have increased more than 6 per cent from 315,000 in 2019 to 335,000 in 2020.

As with previous years, SMSFs most often have unmet advice needs in areas such as investment strategy, retirement planning and tax planning – with cost of advice and confidence in advice some key barriers.

While 39 per cent prefer relying on professional advice, the report found that 61 per cent of SMSFs were open to using free non-personalised advice from sources such as government bodies and investment newsletters to help meet their needs.

In this challenging environment and uncertain investing climate, financial planners are struggling to grow their SMSF client base and revenue, with 46 per cent of respondents citing compliance-related issues as their biggest challenge.  Other challenges faced by planners include client education (33 per cent) and regulatory uncertainty (30 per cent).

“As demand for low-cost, quality advice grows, financial planners are often assessed on their value-for-money proposition. But aside from portfolio and financial outcomes, planners have an opportunity to define their value not just in monetary terms, but also in emotional outcomes,” said Rebecca Pope, Vanguard Australia’s Head of Intermediary.

“The value of developing trust and personal connection between a client and financial planner should not be overlooked. Particularly in times of market volatility, investors are looking for not only portfolio construction from an advisory relationship, but also confidence that their adviser can guide them through such uncertain times.”

Client engagement and product preferences

Retiree clients play a crucial role in SMSF planners’ client base, typically comprising over half of their total SMSF client base (53 per cent). Planners estimate that 16 per cent of this cohort are drawing down at an unsustainable level.

For SMSF clients in the accumulation phase, planners believe that 79 per cent are on track to achieve their retirement goals.

The most popular drawdown methods are the bucket approach (53 per cent) and income from investments (39 per cent). For retiree clients under the age of 65, planners are more likely to draw down from a range of assets without factoring in market movements (18 per cent, versus 10 per cent for retiree clients aged 65 and over).

Planners see longevity risk and generating sufficient income as their primary challenges when servicing their retiree clients, and are looking for better investment products to address these barriers.

Direct listed investments continue to form the bulk of new planner inflows from SMSF clients, comprising 50 per cent of their investments on average. Allocation towards cash and fixed income remain steady, accounting for a fifth of new inflows.

Planners’ use of listed diversified solutions continues to gain momentum, with ETFs (16 per cent, up from 12 per cent in 2019) and managed accounts (9 per cent, steady) receiving a substantial proportion of new SMSF inflows.

“ETFs and managed accounts provide planners great solutions to diversify their clients’ portfolios,” said Ms Pope. “They are low-cost, easy to implement and provide SMSFs access to different markets and asset classes, as well as liquidity benefits”.

Looking forward, planners expect flows to managed accounts to grow substantially over the next three years (from 9 per cent in 2020 to 12 per cent in 2023). Forty per cent of planners already use, and will continue to use, managed accounts for client investments.

Planner priorities are evolving

The current low interest rate environment has prompted planners to advise their SMSF clients to invest in a wider range of products, while paying down debt more quickly.

As a comparison, SMSF specialists are more likely to advise clients to invest in ETFs, direct shares and to pay off debt, while SMSF generalists (those with fewer than 20 SMSF clients) are more likely to recommend managed funds and fixed income products.

When selecting investments for clients, 69 per cent of SMSF planners cite diversification as their top priority. Some 60 per cent of SMSF planners also see liquidity as a key focus, jumping markedly as a key priority in light of heightened market volatility (from 34 per cent in 2019).

While this year’s report found many challenges facing SMSF financial planners, there is still opportunity for planners to improve uptake and focus on enhancing their advice propositions to support SMSFs both from an investment and emotional perspective.

About the Survey

The Vanguard/Investment Trends report is based on a quantitative online survey of 3,156 SMSF trustees and 193 financial planners, conducted by Investment Trends between February and May 2020.

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Robin Bowerman

The annual rate of Self-Managed Super Fund (SMSF) establishment has slowed, with just over 20,000 SMSFs being set up in the first quarter of 2019, down from the 40,000 established in late 2010, according to the latest Vanguard/Investment Trends SMSF Reports – the nation’s most comprehensive research into SMSF trustees and their advisers.

Launched yesterday, the reports collate responses from almost 5,000 SMSF trustees and close to 300 financial planners who advise SMSFs, providing a clear snapshot of the priorities and issues facing SMSF trustees today.

The SMSF sector represented around $747 billion in retirement savings as at March 2019, growing at a slower pace than the preceding 12 months following the impacts of recent industry events, compared to $1.8 trillion invested with APRA-regulated super funds.

“There has been a lot of uncertainty for SMSF trustees recently, particularly in the lead up to the federal election with the Australian Labor Party’s proposed policy to remove refundable franking credits from Australian shares,” said Robin Bowerman, Head of Market Strategy at Vanguard Australia. “However, the proposed policy change did highlight the risk of regulatory change to SMSF trustees and the high levels of home country bias in many portfolios.”

The report also delved into attitudes to other proposed changes to SMSF regulation including the increase to the maximum number of members from four to six, which more than half of advisers saw largely as a positive move, where trustees were unsure of the impact.

The proposed ban on borrowing for investment property was rejected by planners with a majority saying it would have a negative impact on the industry with nearly a third of trustees agreeing with this sentiment.

The total number of SMSFs grew to 598,000 at the start of the year, up just two per cent from the same time last year. The average SMSF balance is $1.2 million, with report findings over recent years showing a trend of lower fund balances and younger trustee ages at the time of establishment.

Despite declining establishment rates, there is still significant appetite among Australians to set up an SMSF, with one in five super fund members planning on setting one up in the future, citing greater control and better returns as the main motivators.

SMSFs are defensive and aiming to diversify

In an uncertain investment climate, more SMSF trustees are taking a defensive stance in their asset allocation.

“Investors’ outlook for market returns is very low at 1.4 per cent, far below the expectations of many economists, including those at Vanguard,” Mr Bowerman said, “this is most likely impacting trustees’ choices about asset allocation quite heavily”.

Despite this, SMSF trustees remain most inclined to invest further in blue chip shares, with 54 per cent citing this as a likely investment choice over the next 12 months.

SMSFs’ allocation to cash increased slightly over the past year to 25 per cent, largely at the expense of unlisted managed funds which dropped by two per cent.

While many SMSFs have adopted a defensive mindset, their appetite for diversifying investment products has increased.

This is highlighted by SMSFs’ use of exchange traded funds (ETFs) with the number currently investing, or planning to invest in ETFs in the year ahead, surging from 140,000 to 194,000 in the last 12 months.

The findings also showed that SMSFs are seeking greater exposure to overseas assets, especially through ETFs, however 52 per cent of respondents cite lack of knowledge about overseas markets and currency risk as the top barriers to obtaining more exposure.  

Looking forward, while building a sustainable income stream remains a key investment goal for many SMSFs, a growing proportion (15 per cent) say protecting their assets against market falls will be their key focus for the year ahead.

Room for advice

The number of SMSFs with unmet advice needs is at a record high, jumping from 275,000 in 2018 to 315,000 in 2019, with their top advice needs relating to estate planning, tax and income strategies, post-retirement planning, portfolio strategy and investment selection.

More SMSFs are experiencing challenges in managing their fund, with many struggling to reduce the time and cost of managing their SMSF. Investment selection, choosing what to invest in, is cited this year by trustees as the hardest aspect of managing an SMSF.

The number of SMSFs who use a financial planner has remained steady throughout most of the past decade but overall satisfaction with financial planners has declined to a seven-year low, with falling satisfaction with level of fees and perceived value for money being the key satisfaction gaps to address.

A lack of confidence in the expertise of advisers is now the number one barrier for SMSFs seeking advice on their unmet needs sitting at 32 per cent, with adviser fees the second biggest barrier at 30 per cent. Despite this, over a third of financial planners expect their SMSF business to increase over the next three years (36 per cent) compared to 15 per cent who expect it to decline.

Vanguard Australia Head of Intermediary, Rebecca Pope, commented on the value this research can provide financial advisers in uncovering the key advice needs of the sector.

“This year’s report showed the ongoing challenge for advisers to find and retain new SMSF clients. This research has for year’s highlighted areas of unmet advice for SMSF trustees, with the top needs almost always focused on areas such as estate and tax planning, providing valuable insight for those seeking to build up their SMSF business,” she said.

“The report also provided some insights for advisers into SMSF trustees’ attitude to alternative forms advice, with more than half saying they would consider over the phone or advice via web chat if it would reduce the cost of the advice service.”

 Key points:

• While SMSF establishment rate slows, future growth prospects remain strong with one in five super fund members planning to set up an SMSF in the near future
• SMSFs are being established at a younger age
• The adoption of ETFs by SMSFs continues to rise with intention to invest in ETFs surging almost 40 per cent in the last year
• The unmet advice needs of SMSF trustees’ are vast and growing
• Cost and trust are two major issues for SMSFs trustees seeking advice

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Robin Bowerman

The establishment rate of self-managed superannuation funds (SMSFs) has hit a ten year low, dropping to 4.8 per cent from a high in 2010 of 9.3 per cent, according to the most comprehensive survey of Australia’s SMSF sector – the 2018 Vanguard/Investment Trends SMSF Report.

While SMSF assets have grown over the year to March 2018, market uncertainty and a lack of perceived investment opportunities appears to be keeping $50 billion, or 6 per cent of overall SMSF monies, waiting in the wings in ‘excess’ cash.

The average balance of self-managed super funds increased slightly over the year to $1.24 million, with retirees representing over half of the total SMSF assets.

While investment in managed funds and ETFs shows a slightly higher uptake, the report continues to highlight a persistent potential lack of diversification in SMSF portfolios, with half of trustees saying that more than 50 per cent of their portfolio is invested in a single investment type – commonly direct Australian shares.

In contrast, the report showed 82 per cent of trustees agree that diversification is important, but only 54 per cent believe their portfolio is already diversified enough.

Commenting on this Robin Bowerman, Head of Corporate Affairs at Vanguard, said “the definition of diversification is concerning, with 84 per cent of respondents considering an investment across 30 Australian shares represents a well-diversified portfolio, when instead it is harbouring high equity concentration risk and home country bias, in addition to very low levels of exposure to international shares and bonds.”

“We believe while there is a growing understanding of diversification, SMSFs seem to be bearing significant risk, largely relying on continued success of the Australian sharemarket, which represents just 3 per cent of the global investable equity market”.

Regulatory uncertainty has overtaken investment selection as the main challenge in managing an SMSF, while the top three investment goals cited by trustees include building a sustainable income stream, maximising capital growth and managing risk.

One consequence of reform in super regulations has been a growth in assets held outside of SMSFs, with a third of trustees making, or intending to make, investments outside of super.

“Because of this it will be important for investors to ensure their entire portfolio (both inside and outside their SMSF) is aligned to their investment goals, in addition to keeping an eye on the tax efficiency of any investments made outside of super given they sit outside of the concessional tax structure,” said Mr Bowerman.

The opportunity for advice

Satisfaction amongst SMSFs who currently have a planner has grown to a three year high, with trustees saying the biggest improvements over the year were the ability of planners to explain investment concepts and the frequency of their planner’s contact with them.

Revealing the opportunity that lies in this segment for advisers, half of SMSFs (or 276,000) citing a wide range of unmet advice needs. The report shows inheritance and estate planning remains the biggest area of unmet advice for SMSFs, with tax planning and investment selection closely following. Further to this, one in eight SMSFs say they are likely to look for a new adviser within the next year, with the top considerations when selecting a new adviser being SMSF expertise, integrity and low fees.

Costs, trust and ethical behaviour are the top barriers to SMSFs seeking advice on their unmet needs.

Commenting on this, Rebecca Pope, Vanguard’s Australian Head of Intermediary, said “There is a great opportunity here for advisers to deliver on these unmet advice needs, and we believe that through some key changes to their practices, advisers can leverage this information and better demonstrate their value, as well as tackling some of the perceived issues around expertise and trust with clients.”

“Our research shows that the advisers who spend less time on investment selection and administrative tasks that can be automated, and more time broadening out their service offering, deepening client relationships and embracing new technologies, are those that are more likely to gain the long-term trust of their clients”, she said.

Over the past four years, the proportion of advisers operating in the SMSF space has remained steady, however similar to the concerns cited by trustees, regulatory change and compliance burdens continue to hamper their practices’ further growth in the sector.

Wrapping up, Robin Bowerman said “Vanguard has partnered with Investment Trends on this substantial SMSF report for more than 10 years, with an ongoing objective of growing the industry’s understanding of this important segment of Australia’s superannuation industry.”

‘In 2018, with the backdrop of the Royal Commission and the Productivity Commission’s review, the only real certainty is uncertainty for SMSFs and their advisers, with the prospect of further regulatory change seemingly inevitable. As Vanguard always cautions, the need to stay informed while maintaining a longer term perspective has never been more important for investors.

“The debate about the viability of smaller balance SMSF is likely to be ongoing because the decision is so dependent on individual circumstances. What is critical is that those considering setting up self-managed funds should get professional advice to make sure a SMSF is the right structure for their long-term financial needs.”

The Vanguard / Investment Trends SMSF Trustee, Planner and Accountant Reports are compiled through online surveys conducted during February and March each year. Total responses received in 2018 after cleaning and validation were 2315, 273 and 871 respectively.

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