The New Generation of SMSF Investor

A recent research report by the SMSF Association and Commonwealth Bank identifies four types of SMSF Investors who are expected to disrupt the existing SMSF Industry. The new Generation of Investors is breaking down the stereotype of experienced and financially confident professionals or entrepreneurs who often make their own investment decisions.

Is this surprising given that SMSFs are the fastest growing Superannuation sector with more than 1.1M members and over 550,000 SMSFs?

Andrea Slattery, Managing Director of the SMSF Association said “The research rightly highlights the importance of the right professional relationships and assistance between trustees and their specialist advisors. The level of technical knowledge and insights of the professional into the often complex world of superannuation is a critical part of that relationships. So too is practical assistance and guidance in the technicalities of the day-to-day running of their SMSF.”

 

The four groups are

 

Outsourcer – A very high reliance on finance professionals as their advisors, often wanting a one stop shop for “everything”

Coach Seeker – this type of SMSF investor has the highest proportion of younger members, especially amongst females. These SMSFs have been set up within the last two years

Self-Directed Investor – This type of investor is likely to demand information, giving more direct control to the individual SMSF and often business owners

Controller – Similar to the Self-Directed investor although this type of SMSF investor has the highest proportion of high salary earners amongst SMSFs

 

The specifications of each of these distinct SMSF investors is listed in the table below:

Outsourcer Coach Seeker Self-Directed Controller
13% of investors 22% of investors 30% of investors 35% of investors
97% rely on professional advice for super, and 2 in 3 are not confident in managing their super Moderate role in actively managing investments 91% are confident in managing their super

Most closely resemble traditional perceptions of SMSFs

Confident in managing super and actively engaged
12% are business owners (lowest of the four profiles) 44% are female members (highest of the four profiles) 62% over 54 62% over 54
58% outsource everything 24% under 45 − highest proportion of younger investors Highest proportion of business owners – 30% Highest proportion of $150,000 + incomes
Most likely to use a financial planner Account for 31% of funds less than two years old Account for 37% of funds more than 10 years old More likely to use an accountant
Big spenders on advice, 88% spend $1,000 and 48% spend more than $3,000 a year 91% have at least one adviser, 41% have two or more 37% have no adviser, the remainder use advice with one in five consulting multiple advisers 85% have an adviser, and 33% have two or more

Maurice Evans CBA Head of SMSF Customers says “…The Industry will need to create service offerings that are relevant to each of the Investor types and account for their unique preferences”

 

Other facts to come from the research indicate:

  • 59% of SMSF investors established the SMSF to get better returns
  • 42% of SMSF investors do not  have a specific retirement plan
  • The main barriers to setting up an SMSF are a lack of knowledge and the time taken to setting up and managing an SMSF

 

This new generation of SMSF investor is set to disrupt the industry which comes as no surprise. There are constant changes in the business world and entrepreneurs wanting independence and control of their own finances, the question now is whether this new generation of SMSF investor will truly yield the best possible returns?

 

Superannuation is a complex world and it pays to have an SMSF specialist overseeing a fund. Through their professional experience and relationships, an SMSF specialist will ensure a better overall performance than those who do not have these valuable qualities.

 

If you need assistance with your superannuation, then be sure to speak with Charles Page, our SMSF specialist who can assist you with exploring your options.