Self-managed super funds have been steadily growing in popularity over recent years, with demand for DIY super even extending to younger people, according to new research.
While people aged over 50 still make up the majority of the SMSF trustee base, the report from the SMSF Professionals’ Association of Australia and Russell Investments shows strong growth in the younger demographics over the least three years.
According to the Intimate with Self Managed Superannuation report: “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.”
“[Younger SMSF trustees] are interested in the longer term and have a good understanding of the short-term issues versus the longer term opportunity,” the report says.
SPAA CEO Andrea Slattery says these findings are 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,” she said.
The report also shows a 5% drop in the proportion of superannuants looking to establish an SMSF over the next five years, however rates still remain high at 12.3%, and 14.3% over the longer term.
The report’s findings were not all favourable however, with contribution caps and constant legislative change leaving SMSF trustees under-invested by an estimated $16 billion per year.
The study also concludes that there is a need for financial advisers to provide their SMSF clients with strategic advice geared at achieving investor goals. This involved educating trustees about asset allocation options beyond cash and direct Australian equities.
“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,” Director of client investment strategies and Russell Investment, Scott Fletcher said.
“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.”