Behind the latest research into self-managed superannuation funds is a startling fact that will cause changes to superannuation policy.
According to Andrea Slattery, chief executive of the Self Managed Super Funds Professionals' Association, around 80 per cent of Australia’s retirement money, money being used by retirees for pensions etc, is in self managed funds.
The money in industry and other managed funds is usually taken out of the superannuation movement when the owners stop working.
By contrast, self-managed funds owners retain their money in their funds and continue managing that money in retirement as they did in the preparation for retirement. That’s exactly what the designers of the superannuation movement envisaged.
Self-managed funds control about 35 per cent of the money in Australian superannuation but the percentage is growing rapidly and looks set to reach 50 per cent of all superannuation funds before the decade is out.
Against this background it has become clear that the army of financial planners with close links to banks are not major players in the self-managed fund advisory game. Too many (but not all) do not provide the products and advice that the self managed funds require.
Yet the self-managed fund advisory business is one of the key advisory markets in the country. The self managed fund people tend to spread the advisory work among accountants, lawyers, actuaries and brokers, as well as planners, depending on their needs.
The latest research by Macquarie Bank and the Self Managed Super Funds Professionals' Association shows that all age groups use self managed funds but there are differences in the advice they want and their investment strategies.
Generation Y is less confident than other generations when it comes to long-term investment decisions. They are very receptive to advice, but do not seek it. Generation Y investors have 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.
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. Reflecting the ‘Great Australian Dream’, Generation X investors have 30 per cent of their SMSF capital in direct property, but with relatively illiquid portfolios, are less likely to have substantially changed their SMSFs' asset allocation in the past year.
The Baby Boomers are increasingly seeking advice, perhaps because of the higher amount in their funds and being closest to retirement. 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.
The Silent Generation (those in retirement) are by far the most likely generation to seek advice.
Surprisingly, despite ongoing market volatility and the flights to safety among some investors, the Silent Generation have actually increased their SMSF allocation to direct equities in the past six years.
It is clear from the research that the self-managed fund movement retains a substantial exposure to equities, so the prosperity of Australia is going to play a big role in the quality of their retirement.