A new Vanguard SMSF report has revealed that while the number of SMSFs who use a financial adviser remained steady in 2022, the proportion of advised SMSFs reduced to 27 per cent, its lowest level since 2019.
Vanguard’s SMSF report, based on research collected between March and April 2022, revealed that cost was the main barrier to seeking advice, closely followed by self-perceived confidence in managing their own financial affairs and the lack of time.
“Previous Vanguard research found that advice provides quantifiable value across the board, regardless of whether clients were human-advised or digital-advised, with the former attributing 5 per cent of their portfolio value to advice, and the latter, 3 per cent,” said Balaji Gopal, head of personal investor, Vanguard Australia.
“Periods of market volatility like what we’re currently experiencing further highlights the value of advice, and the benefits that an adviser can deliver, whether it is investment expertise or coaching for emotional reassurance,” said Mr Gopal.
He highlighted the existence of a “plethora of opportunities” for advisers to help investors understand the value they bring and the support they provide during an investment journey.
In particular, Vanguard’s research showed that SMSF trustees have a hard time keeping up with the required administration and compliance, highlighting the support advisers could provide in reducing the burden of time and keeping abreast of relevant regulatory changes.
Coinciding with the publication of Vanguard’s research, the SMSF Association released its Quality of Advice Review submission, in which it argued that specialist training for professionals providing SMSF advice is “critical” to ensure the health of the sector.
The peak body believes that – in line with the Productivity Commission’s 2018 Superannuation report, FASEA’s Financial Planners & Advisers Code of Ethics 2019 Guide and ASIC’s Report 575 – SMSF advisers should be required to complete specialist education.
“An approved course or accreditation must be completed, and appropriate ongoing professional development maintained to retain that certification or accreditation,” SMSF Association John Maroney said.
“We believe requiring advisers to have specialist advice competencies in certain areas is important to lift the professionalism and integrity of the advice industry.”
According to the SMSF Associations own research, 63 per cent of SMSFs were established on the back of a suggestion by a financial adviser, while 81 per cent of SMSFs use some form of adviser.
“If members and trustees do not understand their obligations and the time required to manage an SMSF, this can not only result in severe penalties and sanctions, but a lack of effective engagement and management causing significant financial detriment,” he said.
Ideally the proportion of advised SMSFs should always be very low. SMSFs are intended for sophisticated, self directed investors who need minimal if any investment advice. In reality the vast majority of SMSF members are anything but. This doesn’t mean they need SMSF investment advice however. It means they shouldn’t be in an SMSF.
Features that used to only be accessible via an SMSF such as a wide range of low cost investment options and flat rate admin fees are now readily available in many public offer funds. Features such as geared direct property investment or day trading or crypto speculation do require an SMSF to implement, but are these really appropriate investment strategies for superannuation?