Adviser use by SMSF investors declining: report
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Krystine Lumanta is a journalist with InvestorDaily, a Morningstar publication.
Self-managed superannuation fund (SMSF) investors prefer to make decisions independently, resulting in a decrease in the use of financial advisers in the sector, according to an industry report.
The latest Vanguard/Investment Trends Self-Managed Super Fund Report found among SMSF investors who currently used an RG146-compliant adviser, only 25 per cent said they made investment decisions with their financial adviser.
A need for control and immense pressure on fees were the main reasons for the decision not to use financial advisers, Investment Trends chief operating officer Eric Blewitt said.
"Even when an adviser is playing a role in the equation, most SMSF investors say that only 25 per cent of those make the investment decision with their adviser," Blewitt said.
"So effectively, the control factor and mentality is certainly coming through [and] as it is self-managed, they want to do it themselves."
Planners are losing ground in the SMSF space as there has been a steady decline in the role of the adviser within SMSFs.
Overall, the use of advisers dropped 9 per cent since the last survey.
However, there were opportunities to add value to this segment, Blewitt said.
"The planning businesses themselves expect that SMSF business will make up a greater proportion of funds under advice and revenue in the years going forward," he said.
"People have advice needs but are really focusing on cost, so they want to make sure they're getting value for it."
Control and fee pressures were also the factors affecting the use of managed funds, the report said.
SMSF allocation to managed funds continues to decline, hitting 6 per cent in April 2012 compared to 9 per cent in May 2011.
However, direct shares allocation continues to grow, increasing slightly to 41 per cent in April 2012, compared to 40 per cent in May 2011.
The report found the average SMSF balance reached over $1 million in April 2012. The median SMSF balance reached $650,000.
Vanguard head of corporate affairs and market development Robin Bowerman said advisers were still able to add significant value to SMSF investors by addressing their specific needs.
"We've seen over the last two to three years that the smarter financial planners are changing their business model in a way where SMSF investors are not just handing it over and asking them what to invest in," Bowerman said.
"They're using their advisers instead to validate their decisions and to coach them - the idea of the planner going from a position of being in complete control of a portfolio to being more of a financial coach, educator and validator."