According to new research from Investment Trends and Vanguard, the annual establishment rate for SMSFs has fallen to a 10-year low, with around 20,000 established in the first quarter of 2019.
While the sector still represents about $747 billion in assets, Vanguard Australia head of market strategy Robin Bowerman said there has been “a lot of uncertainty for SMSF trustees recently.”
Bowerman said this was exacerbated by the “lead up to the federal election with the Australian Labor Party’s proposed policy to remove refundable franking credits from Australian shares.”
Labor’s proposal, he added, “[highlighted] the risk of regulatory change to SMSF trustees and the high levels of home country bias in many portfolios.”
Where do advisers come in?
The research notes that the number of SMSFs with what were described as “unmet advice needs” is at a record high, going from 275,000 last year to 315,000 in 2019. Their primary unmet needs related to “estate planning, tax and income strategies, post-retirement planning, portfolio strategy and investment selection.”
Furthermore, the research found that those surveyed were having challenges managing their SMSF, both in terms of reducing the time and costs involved in management.
While the number of SMSFs using a financial adviser has remained steady, overall satisfaction with their advice arrangements has fallen to a seven-year low, “with falling satisfaction with level of fees and perceived value for money being the key satisfaction gaps to address.”
Reputational issues
There also seems to be a general distrust of advisers’ expertise, which is now the primary barrier (32%) for SMSFs seeking advice.
Explaining this, Vanguard Australia head of intermediary Rebecca Pope said: “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.”
“The report also provided some insights for advisers into SMSF trustees’ attitude to alternative forms advice,” Pope continued, “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.”
What’s clear from the research is that there is now a significant gap in the market for quality SMSF advice. Even if the SMSF boom is slowing, there are still many Australians out there looking for help in managing their funds.
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