Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 216

1. How are SMSFs and their trustees changing?

The 2017 Vanguard/Investment Trends SMSF Report provides a glimpse into the challenges and trends faced by SMSFs, the largest subset of super fund assets with $645 billion under management in the $2.3 trillion of super assets. The Report surveyed 3,000 SMSF trustees, 470 financial planners and 900 accountants.

Three issues stand out from the Report: coping with the increased complexity of the super rules, the growing number of SMSFs with unmet financial advice needs and the latest changes in asset allocation.

Concern over rule changes

Choosing what to invest in remains the hardest aspect of running an SMSF, but keeping track of regulatory changes and how they impact investments are prominent worries.

Source: Vanguard/Investment Trends 2017 SMSF Report

More trustees are concerned about accounting fees and charges than financial advice fees, but the research also shows little concern about finding time to manage an SMSF, accessing investments or information, or sticking to an investment strategy.

SMSF appetite for financial advice

The use of financial advisers (defined to include ‘accountants for financial advice’ and ‘superannuation consultants’) by SMSF trustees has fallen steadily over the last 10 years, from 54% in 2008 to 38% in 2017, although this is up from 36% in 2015. These relatively low levels are surprising. The concern about regulatory changes highlights the need for expert advice as navigating the minefield of super regulations is not for the inexperienced or novice. The top barriers to seeking advice were lack of confidence in advisers' expertise (27%), cost (23%), limited range of advice (21%), previous poor experiences (21%) and lack of ethics (17%). Unmet advice needs was reported at record levels, and 52% of trustees say they are most likely to turn to a financial planner while 48% say an accountant. Among financial planners, 20% identify as SMSF specialists, 49% SMSF generalists and 31% as non-SMSF planners.

SMSF financial planners report their major challenges as compliance and demonstrating value (75%), competition from accountants (45%), working with accountant (40%) and legislative changes (27%). The relationship between the two professions is often strained, although a growing proportion of accountants have a relationship with a financial planner. While 56% of accounting firms report they employ an in-house planner, 30% say they refer clients to an external planner when necessary.

More SMSFs changing their asset allocations

With historically low returns forecast for the next decade, SMSFs will be challenged in meeting their investment goals. More SMSF trustees than ever before are changing their asset allocations, with ‘more defensive’ outweighing ‘more aggressive’. SMSFs' stock market expectations for the next 12 months (excluding dividends) are not optimistic, at only 3.4% on average. As the table below shows, there is no SMSF consensus on whether portfolios should be more aggressive or more defensive.

Source: Vanguard/Investment Trends 2017 SMSF Report

Asset allocation by SMSFs

Cash retained a healthy share of allocations at 26% despite low rates. The table below shows direct shares (excluding managed funds and ETFs) continue to dominate allocations although down significantly in recent years. Residential property has remained steady at around 6-8% of SMSF portfolios for many years.

Proportion of SMSF portfolios in direct shares

Source: Vanguard/Investment Trends 2017 SMSF Report

Managed funds have risen over the years but still at a relatively low 10%, although the intention to use managed funds has risen from 35% to 45% in the last five years. The leading managed fund sub-category is international equities (actively managed), suggesting allocations will improve in future reports and SMSF trustees are finally hearing the message that they are underrepresented globally.

On the ‘intention to invest in the next 12 months’ measure, the leading category is ‘blue chip shares outside of managed funds’, followed by high-yielding shares. ETFs, small caps, infrastructure, bonds and A-REITS all rose over the last year, with term deposits falling away in recent years.

ETFs continue to attract new demand, with 38% of ETF investors holding ETFs via their SMSF. Again, international index and active ETFs top the ‘intention to invest’ score. While in a major growth phase, only 3% of SMSF assets are allocated to ETFs, with financial advisers the core drivers behind the growth.

The summary from the 2017 SMSF Report includes:

  1. Service providers have an opportunity to cover significant unmet needs, with investment selections and regulatory change the most prominent uncertainties. There is a large appetite for education and advice about strategy but not products.
  2. This need has not translated into increased use of financial planners, with trustees citing difficulties finding advisers who can meet all their needs.
  3. SMSF money is ‘on the move’, with asset allocation changes at the highest level observed, but both into more aggressive and more defensive categories.

SMSFs continue to grow with the net annual increase in numbers steady, although the number of new SMSFs established fell just below 30,000 in 2016 for the first time in five years.

If you're an SMSF trustee, how are your allocations changing, and have you outperformed the large funds which achieved 9.2% overall in FY2017?

 

Graham Hand is Managing Editor of Cuffelinks.

RELATED ARTICLES

Meg on SMSFs: Tips for the last member standing

How SMSFs are investing their money

Clime time: Asset allocation decisions for SMSFs

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Latest Updates

Investment strategies

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Planning

Super, death and taxes – time to rethink your estate plans?

The $3 million super tax has many rethinking their super strategies, especially issues of wealth transfer on death. This reviews the taxes on super benefits and offers investment alternatives.

Taxation

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Shares

The megatrend you simply cannot ignore

Markets are reassessing the impact of AI, with initial euphoria giving way to growing scepticism. This shift is evident in the performance of ASX-listed AI beneficiaries, creating potential opportunities.

Gold

Is this the real reason for gold's surge past $3,000?

Concerns over the US fiscal position seem to have overtaken geopolitics and interest rates as the biggest tailwind for gold prices. Even if a debt crisis doesn't seem likely, there could be more support on the way.

Exchange traded products

Is now the time to invest in small caps?

With further RBA rate cuts forecast this year, small caps may be key beneficiaries. There are quality small cap LICs and LITs trading at discounts to net assets, offering opportunities for astute investors.

Strategy

Welcome to the grey war

Forget speculation about a future US-China conflict - it's already happening. Through cyberwarfare and propaganda, China is waging a grey war designed to weaken democracies without firing a single shot.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.