SMSFs have been a beacon of resilience, as evident from the historical low wind-down rate in the last decade. This trend points towards an investor inclination for control over their investments. The 2023 Self-Managed Super Fund Report by Vanguard/Investment Trends reveals that the wind-down count for 2022 was a meagre 9,000, significantly lower than the previous year's figure of over 16,000.
However, the embrace of financial advisors appears to be in a plateau phase. Only 27% of trustees sought advice in the past year, while the flock of SMSFs void of financial advice and having unmet advice needs has swelled exponentially, hitting 270k in 2023 from 235k in 2022.
The report also sheds light on the divergence in the areas of need for advised and unadvised SMSFs. The former group primarily sought advice on identifying viable buying opportunities, while the latter expressed a greater need for strategic guidance and understanding regulatory changes.
A promising finding reveals that one-fifth of SMSFs currently without advisory support are receptive to the idea in the future. The eagerness to engage an advisor is particularly pronounced among female trustees and those transitioning into retirement.
Vanguard Australia's Head of Financial Adviser Services, Balaji Gopal, highlights that the autonomy and control sought by many SMSF trustees are resonating in their interest in steering their investments towards more transparency, flexibility, and customisation to their unique needs.
In terms of asset allocation, one out of every five SMSFs recognises the significant influence of economic conditions on their investment selection process, while over a third have increased their allocation to cash and cash products.
Gopal points out that the trend of gravitating towards perceived low-risk assets like fixed income or cash products is a typical response to uncertain times. With the rise in interest rates, SMSFs have 22% of their assets allocated to cash products.
Yet, Gopal advises that Australians should resist knee-jerk reactions to short-term market conditions when saving for retirement. While having cash reserves in a portfolio is a prudent move, it should be part of a wider strategy of diversified and risk-adjusted approach, rather than a quick-fire decision.
With diversification, time savings, and access to active management being the primary motives for SMSFs investing in managed funds, the report observes a rising trend of sector-specific accessibility as a choice driver.
The investment in managed funds serves as a potent tool for investors, allowing portfolio diversification without the high costs and risks involved in purchasing individual shares. However, Gopal warns that investors must undertake comprehensive research of their investments, evaluating costs, exposures, risks, and performance.