Younger generation leading spike in SMSFs

The establishment rate of self-managed super funds (SMSF) has seen a resurgence alongside a deceleration in wind-ups with the new cohort of trustees being younger, confident and more engaged with their superannuation.

That was the key finding of the joint Vanguard and Investment Trends 2022 SMSF report which was the largest-scale quantitative online study of Australian SMSF investors, conducted between March and April this year.

According to the report, the top reason for establishing an SMSF remained constant – the desire for more control over investments – however the new cohort indicated that achieving better returns and making better investments than an Australian Prudential Regulation Authority (APRA) regulated super fund were also key drivers for them in setting up an SMSF.

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Balaji Gopal, head of personal investor at Vanguard Australia, said: “Research tells us that a record number of new investors made their first trade during the pandemic and a large proportion of these new investors were Millennial and Gen Zs.

“Unsurprisingly, many of them want full control of their retirement, and superannuation is a vital component of that journey.”

In the adviser space, the number of SMSFs who used a financial adviser remained steady but as a whole, the proportion of advised SMSFs had reduced to its lowest (27%) since 2019.

The research 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% of their portfolio value to advice, and the latter, 3%,” Gopal said.

“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.

“There remains a plethora of opportunities for advisers to help investors of all kinds understand the value they bring and the support they provide during an investment journey.”

The survey also revealed that SMSF trustees found that the hardest aspect of running an SMSF was keeping up with the required administration and compliance, again highlighting the support advisers could provide in reducing the burden of time and keeping abreast of relevant regulatory changes.

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