SMSF unmet advice needs at record high

The number of Australian self-managed superannuation fund (SMSF) trustees who say they have unmet advice needs reached the highest level observed, according to a report by Vanguard and Investment Trends.

The 2016 Vanguard/Investment Trends Self-Managed Super Fund Reports said that although more SMSFs were open to turning to financial advisers for investment-related advice, the retirement-related advice remained their top "unmet advice need".

The survey of almost 3,500 SMSF trustees and 570 financial planners showed other key areas in which they lacked proper advice included inheritance and estate planning, pension strategies, age pension and longevity risk.

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The overall number of SMSF trustees with unmet financial advice needs rose from 212,000 to 255,000 over the last 12 months.

Although the proportion of SMSFs using a financial planner remained steady over the last 12 months, under the new licensing rules the roles of accountants and financial advisers were expected to evolve. Following this, financial planners could best take advantage of this increased demand by forming referral relationships with accounting firms and, according to the report, the majority of them had been already working to establish partnerships with accountants.

Vanguard Australia head of distribution, Michael Lovett, said: "The impact of recent changes to the licensing rules covering the areas where accountants can — and cannot — advise clients is beginning to be felt."

This year's report also proved that finding and retaining new SMSFs clients was an ongoing challenge for advisers although planners were still committed to grow their SMSF business.

With traditional investments in direct shares and cash products seeing a continued drop in appetite among SMSFs at the expense of managed funds and exchange-traded funds (ETFs), trustees were reporting difficulties in accessing professional expertise in the area of ETFs.

Investment Trends' head of research, Recep Peker, said this would present a growing opportunity for financial planners to step in and position themselves as educators, especially as SMSFs were more often looking to expand their knowledge on managed funds from other sources than financial planners.

The use of ETFs among SMSFs continued to grow, driven by a desire for international diversification through access to overseas markets. They also had an ability to grow their portfolios while managing risk.

"This year we have also seen investment strategy review and identifying assets as topics of increased interest for trustees, as well as selection of ETFs," Peker said.

"In the current environment of market uncertainty and softer expectations for domestic investments, it's no surprise to see trustees wanting professional help in validating their investment strategies and portfolio construction."

The total number of SMSFs grew to 567,000 by the start of this year, up 4.8 per cent over 12 months, with the average SMSF balance at $1.2 million.

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