The 2014 Self-Managed Super Fund Planner Report produced by investment management company Vanguard and investment research provider Investment Trends also showed 54 per cent of SMSFs are now open to using an adviser’s expertise.
The report, which surveyed 489 financial advisers in April, indicated trustee satisfaction with advisers has also increased in the past 12 months, climbing to its highest level since the GFC.
“Furthermore, a projected 286,000 SMSFs have unmet advice needs they are willing to pay for,” said the report.
Vanguard head of adviser distribution Michael Lovett said these finding demonstrate the “significant opportunity professional advisers have to expand their service offering in the SMSF sector”.
“The willingness of SMSF investors to engage with a financial adviser continues to increase, particularly around unmet advice needs such as inheritance planning and protection of assets against market falls,” said Mr Lovett.
The research found a number of elements contributing to SMSF trustee satisfaction with advisers, including “technical expertise, tax expertise, quality of support staff and clarity of fees and charges”.
“The challenge for advisers is to demonstrate that the value of good financial advice is much broader than investment selection,” said Mr Lovett.
The cost of advice remains a concern for SMSF investors, according to the report. However, an increasing number of trustees say they prefer face-to-face advice, even if it is more costly.
The research also showed an increased focus on diversification, with over a quarter of all SMSF investors making substantial allocation changes in order to increase the diversification of their SMSF.
I think Mr Lovett is right about the challenge. Many SMSF investors are in the “validator” bucket. Most of them don’t want traditional financial advice. They want strategic advice, episodic advice, validation of decisions they have already partially formed. My view is that to provide this type of advice, advisers need to get inside the heads of the SMSF investor – deeply understand their decision making, their inherent biases, the influence of context and emotion. SMSF advisers and accountants need to have a solid understanding of Behavioural Finance principles and how they can be used to help clients make the right decisions. Behavioural Finance research shows that opportunities to benefit clients can be measured in the billions, although I’m sure most clients would be happy with just a few hundred thousand! 🙂