Zurich’s recent Intergenerational Advice Masterclasses not only brought to advisers deep research, practical solutions and a process to the challenge of becoming the “family adviser”, but also created a forum where advisers shared their endeavours, successes and failures in the quest to become the central hub in a client’s tribe.

In part two of a four part series the dialogue of these Masterclasses is shared to drive an increase in the number of Australians seeking financial advice by tapping into the most powerful institution an adviser can have a positive influence on: the family.

Whether you’re an advice business that offers retirement planning advice to boomer clients and has a desire to tap into the generation X children of your existing clients, or whether you are a business that is deliberately focusing on X and Y clients, a tailored offering is the key ingredient for success.

The opportunity is great with data highlighting that only one out of every two wealth management clients in the 30-49 age group, (which stands to inherit from the boomers) is satisfied with their primary wealth provider.[1 ]However a traditional service model and traditional offerings do not resonate with this type of client. Unlike their boomer parents (who like their senior parents have been comfortable with the adviser led model), this new breed of client is looking for more. They desire efficient, valued based advice that taps into basic human drives: to learn, to acquire, to bond and to defend[2] . They are also more likely to socialize the advice messages they receive with peers.

The services that advice firms offer and the way these offers are positioned with these clients are keys to success in forging, intergenerational advice relationships and a valued proposition to the X and Y clients, that will drive future business growth for financial advisers.

During the Zurich Intergenerational Advice Masterclasses (May 2014) advice businesses shared the techniques, process and capabilities that have seen them become leading differentiated businesses in the quest for not only engaging X and Y clients but also doing it profitably.

The services these businesses had industrialised included[3] :

• Complete risk insurance offers encompassing small and medium enterprise business succession solutions as well as a well defined insurance philosophy (tailored insurance policy matching to client needs);
• Mortgage solutions;
• Debt recycling strategies;
• Cashflow management solutions and advice; using cashflow software and by deliberating collaborating with clients on cashflow management often using this as a centerpiece of the relationship;
• Property advocacy services.

These businesses positioned these services in the context of an all-encompassing relationship. In other words they’d been positioned in ways that demonstrated that these businesses understood what was important to these clients[4] .

Commons issues these clients face include:

• X gen families are under increasing time and financing pressure;
• Their major concerns are housing, family, schooling, career, self-development; • Consequently they also seek advice about issues such as parenting, self-fulfillment, health, lifestyle and dealing with daily life stressors.

By using engagement techniques such as[5] :

• Mind maps;
• Psychological profiling;
• Engagement apps;
• Visual white boards;
• Lifestyle questionnaires.

These businesses intertwined the advice solutions in an illustration of how the solutions connected what was at the forefront of importance in the client’s world.

Services such as divorce, career, and lifestyle counseling were not only offered but promoted as “the why” the advice relationship deserved its rightful place at the centre of the client’s family and social circle.

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[1] Accenture Wealth and Asset Management Services, 2012, The Greater Wealth Transfer.

[2] Nohria and Lawrence, 2002, Driven: How Human Nature Shapes Our Choices.

[3] Insights from Intergenerational Masterclasses, May 2014, Zurich Australia.

[4] Zurich Australia, 2014, Becoming the Central Force in Your Clients Tribe.

[5] Insights from Intergenerational Masterclasses, May 2014, Zurich Australia

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Click here to view Video: The intergenerational advice challenge and solution – Part 1

Click here to view Video: The intergenerational advice challenge and solution – Part 3

Click here to view Video: The intergenerational advice challenge and solution – Part 4

Greg McAweeney

Generation Y may appear to have it all – not only are they young with grand aspirations for their budding futures, they are more likely than Gen X and Baby Boomers to claim they are better off financially than last year. This is according to the RaboDirect Financial Health Barometer, which surveyed 2,300 Aussies aged 18-65, and showed that Gen Y were also most likely to say they were saving more than they were in the 12 months prior (33% vs 24% of total respondents), saving on average $943 each month vs $908 of the rest of the population.

And yet, Gen Ys are most likely to say they find dealing with money ‘stressful and overwhelming’ (47% vs 35% of the total respondents).

According to RaboDirect, Gen Y is on the right track in terms of their financial habits; but staying informed about their finances and turning to a professional may help reduce their financial worries further.

Greg McAweeney, Executive General Manager from RaboDirect said: “Young people face challenges that are unique to their generation. Housing has arguably never been more unaffordable, even with historically low interest rates, house price growth is pitted against slowing earnings growth. They have lived through the GFC and the cost of living in Australian capital cities is among the highest in the world. Add to that the pressures of modern life and a want to keep up with the Jones’ and is it any wonder Gen Y are feeling stressed? And yet our research shows that Gen Ys are taking control of their finances and adopting good savings habits from an early age which are important factors for ensuring a comfortable financial future.”

“It’s encouraging to see that Gen Ys are happy to talk to others for financial advice – if you’re finding dealing with your finances stressful, a second opinion can help set you straight and give you some practical steps to take to improve your financial outlook. My only warning would be that relying on friends and family isn’t always the smartest plan. Just as you’d likely trust the diagnosis given by a trained doctor over one from your friend, a trusted financial professional will be able to give you the best advice that is particular to your needs. Why not make 2015 your year for getting your financial house in order? Having even a simple plan can really offer peace of mind – and that goes for every generation.”

Key stats for Gen Y:

Greg McAweeney

Well-meaning parents may actually be doing their Gen Y kids more harm than good by letting them live at home unconditionally and indefinitely according to the latest research from the 2014 RaboDirect Financial Health Barometer (FHB).

According to a recent report, parents of Gen Y ‘never leavers’ pay an estimated $5,000 a year in added household costs to support their adult children living at home. And the FHB research shows that many of these Gen Ys are not mindful of their mum and dad’s household budget. Only 38% of Gen Ys living at home take steps to reduce utility bills such as turning off lights, minimising unnecessary heating or switching off appliances not in use, compared to 67% of Gen Ys who have flown the nest and are paying their own bills.

According to RaboDirect’s Group Executive, Greg McAweeney, the results of the latest FHB lead to inevitable questions about the role of parents in teaching their adult kids financial responsibility.

“It’s easy to understand why parents want to help their kids out, particularly if they feel they can within their means. You only need to look at the rising cost of living to see most kids would be happy with a little bit of extra help. Some may argue these adult kids who live at home are getting an easy ride – that isn’t a problem in itself but if they are missing out on learning valuable lessons about budgeting and financial responsibility it may turn into one,” Mr McAweeney said.

“I’m not suggesting parents kick their kids out, but it’s worth considering the ground rules and setting some financial goals for adult kids so they can develop sound financial habits for the future.”

The FHB also found that the longer Gen Y’s stay at home the less likely they are to want to leave – with more than one third (34%) of those aged 26 to 29 years claiming they loved living at home and never wanted to move out. For 18 to 21 year olds the thought of independence and freedom was somewhat more alluring with only 13% planning to stay at home as long as possible.

Mr McAweeney expanded, “Our research suggests that the older Gen Ys have a good understanding of the cost of leaving home and perhaps have established their independence. So the upside to living at home is clear for this group. I expect that among many 18 to 21 year olds there is an element of naivety about the cost of living and the aspiration to leave home is compounded by a desire to prove they can survive in the outside world.”

Other key findings from the 2014 Financial Health Barometer

Gen Ys who are not living at home are more likely to adopt some sensible money saving tactics as such using their own bank ATMS (67% versus 50% of those living with parents) and taking a packed lunch to work or study in order to save money (78% versus 63%)

‘Never leavers’ more likely to make more impulse purchases and spend more money doing so

The FHB also showed Gen Ys who are living with parents made an average of 4.2 impulsive purchases over the week prior to the research being conducted, and spent an average of $343 on these purchases. For those living out of home, 2.8 purchases were made, costing a total of $253.

Despite there being some discrepancy in attitudes to how long Gen Ys want to stay to home and how long they are welcome to stay, there is broad agreement in the triggers for eventually moving out. Although progress towards financial independence may be hampered by parents, almost half of adult kids and parents said they, or their kids, would move out when they felt they were earning enough to be financially independent.

A similar number of adult kids and their parents said that they, or their Gen Y kids, would move out when they had saved enough for a home deposit. Almost one in ten Gen Ys (8%) suggested they would stay at home until they moved in with a partner. The corresponding figure for parents was 11%.

Mr McAweeney concluded, “Although many Gen Ys are in no rush to leave, the reality is that the time will come with life’s triggers. And while parents may miss the company of their Gen Y kids, they can look forward to an extra $5,000 to spend every year which would go nicely towards an overseas holiday, a technology upgrade, or to give an added boost to their retirement savings!”

Gen Y-ers looking to family, not professionals, for advice.

When it comes to money and our financial futures – who do we turn to and trust most to give quality advice?

According to the 2013 RaboDirect National Savings & Debt Barometer (NSDB), 36% of Gen Y relied on family and friends for financial advice – using their loved ones over a bank (33%), an accountant (14%) or a financial adviser (13%).

At the same time, Gen Y is the most trusting of financial planners as a source of financial advice of all the generations. However, cost appears to be their biggest hindrance to enlisting the help of a qualified financial planner, with 60% of Gen Y respondents saying they think using a planner would be expensive.

According to Bede Cronin, RaboDirect’s National Manager Key Account Services, these statistics highlight the need for greater awareness of the benefits of financial planning compared to the actual costs of obtaining it.

“While it is certainly encouraging to see that financial matters are being discussed with friends and family instead of being treated as a taboo topic, it is still important to enlist the help of a qualified professional to ensure that advice is sound and tailored to individual circumstances,” Mr Cronin said. “In light of Gen Y’s perception that financial advice is expensive, seeking free advice from family and friends may be viewed as the better option, however, when it comes to your financial future we would always recommend seeking tailored professional advice.”

Based on the NSDB results, RaboDirect is encouraging financial planners to confront the perception that advice is too expensive and demonstrate the role they can play in developing long term strategies to deliver financial security.

“Our findings reveal a clear opportunity for planners to engage with younger generations to teach them about the value of financial planning and show them the benefits that come from investing in their financial wellbeing. From the work our Key Account Services team does partnering with financial planners to deliver savings and cash investment solutions to clients, we know that many financial planners do an excellent job in building lasting relationships with clients. The opportunity for all planners is to not just develop strong relationships for older generations but to develop a clear plan for engaging Gen Y also.

“Gen Y needs to understand that financial advice doesn’t have to be complex and costly. It can be simple, affordable and deliver better financial outcomes than would be achieved in the absence of professional advice. And with more than a quarter of Gen Y saying they think they will run out of money during their retirement, it is never too early to enlist the help of a professional who can design an appropriate financial plan to set you up for the future,” Mr Cronin said.

While there was some discrepancy in the survey among generations over who they trusted most for financial advice, the support for financial literacy/language being taught at schools was universal across the generations.

“Financial literacy is obviously a very important topic for all Australians and we should be doing all we can to encourage people to engage with their finances at a young age. Knowledge is key. And with a firm understanding of financial terms and concepts, we would hope to see the number of people who see financial planning daunting – currently around a third of respondents – drop significantly.

“We support initiatives that help to raise levels of financial literacy and designed the National Savings and Debt Barometer to drive important conversations among consumers about the importance of saving as well as the value of trusted professional advice.”

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Gen Y-ers looking to family, not professionals, for advice.

When it comes to money and our financial futures – who do we turn to and trust most to give quality advice?

According to the 2013 RaboDirect National Savings & Debt Barometer (NSDB), 36% of Gen Y relied on family and friends for financial advice – using their loved ones over a bank (33%), an accountant (14%) or a financial adviser (13%).

At the same time, Gen Y is the most trusting of financial planners as a source of financial advice of all the generations. However, cost appears to be their biggest hindrance to enlisting the help of a qualified financial planner, with 60% of Gen Y respondents saying they think using a planner would be expensive.

According to Bede Cronin, RaboDirect’s National Manager Key Account Services, these statistics highlight the need for greater awareness of the benefits of financial planning compared to the actual costs of obtaining it.

“While it is certainly encouraging to see that financial matters are being discussed with friends and family instead of being treated as a taboo topic, it is still important to enlist the help of a qualified professional to ensure that advice is sound and tailored to individual circumstances,” Mr Cronin said. “In light of Gen Y’s perception that financial advice is expensive, seeking free advice from family and friends may be viewed as the better option, however, when it comes to your financial future we would always recommend seeking tailored professional advice.”

Based on the NSDB results, RaboDirect is encouraging financial planners to confront the perception that advice is too expensive and demonstrate the role they can play in developing long term strategies to deliver financial security.

“Our findings reveal a clear opportunity for planners to engage with younger generations to teach them about the value of financial planning and show them the benefits that come from investing in their financial wellbeing. From the work our Key Account Services team does partnering with financial planners to deliver savings and cash investment solutions to clients, we know that many financial planners do an excellent job in building lasting relationships with clients. The opportunity for all planners is to not just develop strong relationships for older generations but to develop a clear plan for engaging Gen Y also.

“Gen Y needs to understand that financial advice doesn’t have to be complex and costly. It can be simple, affordable and deliver better financial outcomes than would be achieved in the absence of professional advice. And with more than a quarter of Gen Y saying they think they will run out of money during their retirement, it is never too early to enlist the help of a professional who can design an appropriate financial plan to set you up for the future,” Mr Cronin said.

While there was some discrepancy in the survey among generations over who they trusted most for financial advice, the support for financial literacy/language being taught at schools was universal across the generations.

“Financial literacy is obviously a very important topic for all Australians and we should be doing all we can to encourage people to engage with their finances at a young age. Knowledge is key. And with a firm understanding of financial terms and concepts, we would hope to see the number of people who see financial planning daunting – currently around a third of respondents – drop significantly.

“We support initiatives that help to raise levels of financial literacy and designed the National Savings and Debt Barometer to drive important conversations among consumers about the importance of saving as well as the value of trusted professional advice.”

The post Advice conundrum – Gen Y trust financial advisers but view as too expensive appeared first on AdviserVoice.

Gen-yers increasingly interested in SMSFs.

The demand for SMSFs among younger people is growing apace, according to the latest research report commissioned by the SMSF Professionals’ Association of Australia (SPAA) and Russell Investments.

The report, titled “Intimate with Self Managed Superannuation”, found that although people aged over 50 still comprised the largest number of SMSFs, the strong growth was in the younger demographics.

“It is the 41-50 age group that continues to be the largest source of demand, as cited by three-quarters of financial planners. This is followed closely by those in the 31-40 age group, where two out of three advisers are expecting greater demand from them.

“It is this younger demographic that has exhibited strong growth over the past three years. They are interested in the longer term and have a good understanding of the short-term issues versus the longer term opportunity,” the report says.

Intimate is the fourth consecutive report on the state of the SMSF sector based on two online surveys developed by CoreData in partnership with SPAA and Russell. A total of 1,267 Australian consumers were interviewed, of which 385 were SMSF trustees and 882 did not have an SMSF.

SPAA CEO Andrea Slattery says: “The continuing strong growth in the younger demographic is both significant and encouraging. It means more young people want to take control of their retirement incomes, and, for the professional advisers it creates the opportunity to grow their businesses.

“As the report found, the popularity and awareness across superannuation remains high as evidenced by the sector’s growth in terms of FUA, accounts and members.

“Although the proportion of superannuats looking to establish an SMSF in the next five years has dropped from 12.3% from 17.3%, the intention still remains high over the longer term with 14.3% of the non trustees likely to set one up over the next five years.”

Contribution caps and constant legislative change, however, are still taking their toll. Slattery says that for the fourth successive year, SMSF trustees have said that they under-invested in their future retirement by $16 billion a year because of these factors.

On the investment front, the report says the expected movement out of cash in 2013 because of the strong rise in equities simply did not occur. In 2012, the allocation to cash was 33.9% and in 2013 this figure had only fallen to 31%.

Australian equities did not benefit, however, witnessing a slight decline from 37.1% to 36.1%, with residential property benefiting with a rise from 5.6% in 2012 to 9.9% in 2013.

Based on these numbers and the fact that international equities rose sharply in the 2013 calendar year, the report says there is a real opportunity for financial planners to educate trustees about the benefits of diversification “but also how risk as a concept is not related to asset classes along the risk curve but is also related to risk as an opportunity cost”.

Scott Fletcher, Director, Client Investment Strategies, Russell Investments says: “It is clear from the report that investment advice is most valued by SMSF trustees.

“It’s not all about picking stocks and sectors; SMSFs need to tap into strategic investment advice to help them achieve their desired goals and deal with complex issues such as sequencing risk, and the impact of this on retirement outcomes. There is a real opportunity for advisers to step up into this role.

“Like all investors, the preferences and biases of SMSF investors have a significant impact on their strategic asset allocation and their ability to link goals to outcomes. This is an underappreciated aspect of portfolio design that advisers can shed light on. Often, SMSF investors will jump straight to the vehicles they prefer to invest in, bypassing the all important goal-setting and asset allocation steps in the process.“

The report adds that it will be a challenge for financial planners to educate trustees about the potential opportunities available in other asset classes outside of cash and direct Australian equities.

“However, given trustees’ dislike or lack of understanding of diversification, planners need to demonstrate the value of other asset classes and how these can play a role in helping trustees achieve their retirement objectives.

“This will be a difficult challenge, however, as three in five trustees claim they have a “strong” or “very strong” knowledge of investments compared with non-trustees, with the majority (51.9%) using their own research process,” the report says.

The number of Australians taking out life insurance on the rise.

Motivations for taking out life insurance cover⁽¹⁾ have been revealed in new consumer research findings.

One reason people obtain financial protection is after hearing a story of a friend or family member who has been saved from financial hardship by one or more types of their life cover (including Life – lump sum upon death; Trauma/Illness – lump sum for defined illnesses; Disability – lump sum upon permanent and total disability; and Income Protection – regular income payment upon defined illness/disability).

Australia’s leading specialist life insurer TAL has undertaken research⁽²⁾ to better understand consumer behaviour towards financial protection and planning attitudes.

One in five people (20%) in the national poll said they had heard of a friend or family member who had suffered an injury, illness, disability or even death but their life insurance had saved them and/or their family from financial hardship as a result.

Where people already had life insurance, the number of those who had heard of these safety-net stories rose to one in three (or 33%), indicating the positive experience that life insurance performed can be very motivating to obtain financial protection.

In a separate question about the actual reasons for taking out life insurance, the primary reason given by most respondents at 39% was that they made their own, independent decision, unprompted.

The second main reason was because life cover was already part of their superannuation (32%), followed by being prompted by a family discussion (22%), after a discussion with a financial adviser (19%) and being motivated by a real life story of death, illness or accident (12%).

TAL Group CEO Jim Minto said: “The very high level of unprompted actions being taken by people (39%) is a surprise when so often people talk about low interest or engagement in life insurance. The results also show that stories of how life cover has protected someone they know from financial hardship due to illness or accident can be a real motivator in ensuring they themselves obtain cover.

“I am actually not surprised one in five people have heard of a story how life insurance has saved a family from financial hardship in a time of need.”

While life insurance often only becomes a topic of barbecue conversation when there is a personal connection to a story of someone falling on hard times, financial protection should not be seen as a taboo topic. Life insurance is delivering all time record benefit payments to Australians.

“Let’s face it, life insurance has traditionally been something many people would rather not think about, even though they should. Hearing how life insurance can help financially in a time of need is a compelling reason to ensure protection is in place,” Mr Minto said.

Table 1: Most common reasons for taking out life insurance

Interestingly, Generation Y (specifically those Australians under the age of 25 years) is far more likely to be independently initiating the decision at 48% of that cohort, compared to the average of 39% across all generations.

The research found that while almost one in five (19%) were prompted by an adviser or financial planner to consider their life cover requirements, that figure rises to 26% among Gen Y, compared to just 14% for Gen X and 17% for baby boomers.

“These results reveal that more of our youngest adults are ‘making their own decision’ to take out life insurance at a higher rate than older generations, which shows they are more engaged in their financial affairs than they have been given credit for in the past,” Mr Minto said.

“Younger generations are using technology to take matters into their own hands to seek out services and products to meet their needs, and it appears that their own research is them into seeking out financial products and advice.”

The research continues to show there are the many ways people choose to obtain life insurance solutions, such as via super funds, financial advisers or directly with life companies, which supports TAL’s multi-distribution approach to ensure consumers obtain life insurance products and services in ways they prefer.

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1. Life cover is a collective description for the four main forms of life insurance: Life – lump sum upon death; Trauma/Illness – lump sum for defined illnesses; Disability – lump sum upon permanent and total disability; and Income Protection – regular income payment upon defined illness/disability.

2. This survey was undertaken online by Galaxy Research with 1,260 Australians, from the ages of 18–69 years old. Age, gender and region quotas were applied to the same and the dataset was weighted to national proportions.

Saving for Christmas starts early and budgets expected to be lean.

It may be a common gripe that Christmas comes earlier each year but new research has revealed that Christmas budgeting has already been underway in around one in five households since October.

The research comes from the 2013 RaboDirect National Savings and Debt Barometer (NSDB), an extensive study of Australians’ attitudes towards money and savings. The findings of the latest NSDB point to a lean Christmas for many with budgeting, bargain present shopping and agreeing a giving and receiving strategy between family members a key part of the planning process.

The survey found that Gen X were most likely to be planning for Christmas in October (22%), followed by Gen Y (16%) and Baby Boomers (15%).

The most common way of planning for the festive season was to set a budget ahead of time (58%). Additionally, 42% of people who started their planning early have already made a start on their Christmas shopping. For one third of people (32%) already planning Christmas, agreeing the giving and receiving strategy between family members had already been addressed back in October.

With Australians already expected to spend an estimated $42 billion this Christmas[1], planning ahead will be crucial to avoid a last minute impulse overspend during the holidays, says RaboDirect Executive General Manager, Greg McAweeney:

“As a nation, we will be spending upwards of $40 billion this Christmas. That is a vast amount of money – in fact; it would be enough to end world hunger for 12 months if it was instead donated to charity. Or if you break it down further, this estimate amounts to about $1,800 per person – which could buy 20 Christmas turkeys; or an overseas airfare; or 90 trips to the cinema. With that in mind, it is heartening to see that one in five Australians are proactively planning to spend consciously and avoid impulse purchases during the festive season.”

Mr McAweeney commented that this trend reflects a change in sentiment that has been observed through many facets of the RaboDirect NSDB research. “This year we have seen a trend for Australians to be more engaged with their money – whether that means planning a budget or knowing their rates on accounts. A lot of people have been lacking confidence in the economy and as a result, their own financial circumstances. This has led to people taking greater financial control, and having a plan for Christmas is one such example of how people are becoming more engaged with their finances.”

Key findings amongst those who have started planning for Christmas:

• Gen Y was more likely than Gen X or Baby Boomers to set expectations with family members about gift giving (40% versus 28% for Gen Y and Baby Boomers).
• Gen X was most likely to have started their shopping early (46%) compared to Gen Y (40%) and Baby Boomers (38%)

Mr McAweeney concluded, “Having a plan in place helps people to keep their finances on track, whether this is a savings goal or setting spending limits. This is particularly important at a time like Christmas where it is very easy to fall victim to impulse spending. If you haven’t started thinking about your Christmas gift buying yet, it’s never too late to start. The cost of entertainment, presents and hosting Christmas quickly mounts up so establishing spending plan will help ensure that Santa is the only one in the red on Christmas day.”

The 2012 RaboDirect National Savings and Debt Barometer reveals Aussies to be a charitable bunch with 20 per cent of Australians across all income brackets giving at least $500 per year to charity.
 
The survey also reveals that Generation Y – who is often given a bad rap for being self-centred, arrogant and financially irresponsible – is in fact ‘Generation Generous’. Of all the generations polled, Gen Y is the most committed to charitable giving. In the low income bracket (<$40k) Gen Y is most likely to donate to charity. They are also the least likely to reduce the amount they give when they suffer from a decline in their income.
 
Greg McAweeney, Executive Manager RaboDirect Australia & NZ said:
“Our survey figures show that Australians have a giving nature and want to help out those in less fortunate situations. While Generation Y can often be subject to negative press, our survey results have proven that they are more giving than Gen X or their Baby Boomer parents, even when they have less to give.
 
“When times are tough, donations are often the first things to suffer. However, there are ways and means to work your charitable giving into a normal savings plan.  Setting aside a small regular amount of money instead of drawing out a large sum is one way to do this. But money isn’t the only way people can help out – donating your time and your skills can be just as much help.
 
“As part of a co-operative bank, it is inbuilt within the RaboDirect culture that we give back to the communities in which we live and work. As well as charitable donations, we believe that there are other opportunities out there to make a difference. For a start, we offer our employees ‘Community Leave’, a program that allows employees to take work days out to volunteer within a charitable organisation of their choice.
 
“We see this as a great opportunity for employers and employees alike to look at putting programs in place within a business that provides people with opportunities to give back to the community and make a difference.”

While the report, called The SMSF Generations Report, reveals SMSFs are popular with every generation of Australians, it has highlighted that there is no such thing as a typical SMSF investor. There are significant differences in the attitudes, investment priorities and lifestyle aspirations of each age group.

With SMSFs already the largest and fastest growing sector of the Australian superannuation industry, the report emphasises that advisers need to take into account these generational differences when delivering advice to help better meet the needs of investors.

Macquarie Banking and Financial Services Group Analytics Research Manager, Gary Lembit, said that investors across the generations recognise the value of advice when managing their SMSFs, but that advisers should tailor their approach according to life stage to have the greatest impact.

“It is clear that one of the main reasons investors opt for an SMSF is to have greater control and choice over their investments. However, this does not mean they want to be entirely self-directed,” Mr Lembit said.

“As the insights in this report show, SMSF investors across the generations recognise the role financial advisers have to play in providing valuable guidance on their investments. However, through better understanding their clients’ state of mind, advisers can adapt their advice models and learn to communicate in a way that better meets their needs, while articulating the value they can add.”

Despite investors sharing the common reasons for choosing an SMSF, more control and choice over their investments, there is a significant difference between how receptive each generation is to receiving financial advice.

Generation Y, not surprisingly, is generally highly confident about many aspects of their lives, but when it comes to long-term investment decisions, they are less confident than other generations. They are very receptive to advice, but do not seek it, meaning it is important for advisers to develop ways to proactively communicate with this group and help them understand the value of advice.

Generation X is a lot more sceptical about financial advice, but being extremely time poor, they are willing to pay for advice in certain situations, particularly if it helps save time.

The Baby Boomers are increasingly seeking advice, perhaps because of the higher amount in their funds and being closest to retirement, while the Silent Generation (those in retirement) is by far the most likely generation to seek advice.

Andrea Slattery, CEO of SPAA, said that as the number of investors using SMSFs grows, the industry needs to respond by focusing more on what they can do to best service this distinct group.

“We have found time and time again that investors who use SMSFs are the most engaged people in superannuation. They want to make sure their funds perform well and are interested in understanding what is involved to help make this happen,” Ms Slattery said.

“This includes accessing financial advice, which these investors show a continuing appetite for, but as this report has shown, the advice industry can make their role even more effective by tailoring their approach to the stage of life the investor is in. We think that through reporting insights like these we can continue to support the advice industry in its aim of demonstrating its value to investors and helping investors make the most out of their retirement savings through their SMSF.”

In addition to highlighting the differing attitudes towards advice, the report provides a snapshot of the SMSF asset allocation preferences among the generations. As a general trend, cash/near cash holdings and direct shares in SMSFs have increased in recent years, while managed fund holdings have decreased.

“We have always known that the cash holdings in SMSFs as at 30 June each year is not a true indication of the cash that is held throughout the year. This report highlights what trustees really do when they have control and flexibility and how they choose their assets to hold, including cash/near cash assets.”

Generation Y has lower cash balances and a higher proportion of their portfolios in equities than others, and a greater focus on achieving capital growth. They have been the most active during the past 12 months in changing the asset allocation of their funds.

Reflecting the ‘Great Australian Dream’, Generation X has 30 per cent of their SMSF capital in direct property, but with relatively illiquid portfolios, is less likely to have substantially changed their SMSF’s asset allocation in the past year.

The Baby Boomers have recently taken a more defensive stance towards their SMSF asset allocation. While still largely focused on capital growth, half have sought out franked dividends as a source of regular income. They still have among the highest allocations to direct equities, second only to the Silent Generation. Surprisingly, despite ongoing market volatility and the flight to safety among some investors, the Silent Generation have actually increased their SMSF allocation to direct equities in the past six years.

Summarising the key learning from the report, Mr Lembit said: “The overall message is clear: by tailoring advice to the different investment styles and decision-making processes of each generation, advisers can build stronger and more fruitful client relationships.”

25 July 2012