##{"id":61961,"date":"2013-06-06T13:03:21","date_gmt":"2013-06-06T03:03:21","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2013\/06\/06\/smsfundamentals-financial-advisers-add-diversity\/"},"modified":"2013-06-06T13:03:21","modified_gmt":"2013-06-06T03:03:21","slug":"smsfundamentals-financial-advisers-add-diversity","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2013\/06\/06\/smsfundamentals-financial-advisers-add-diversity\/","title":{"rendered":"SMSFundamentals: Financial Advisers Add Diversity"},"content":{"rendered":"<p>\n\t<strong><span>SMSFundamentals<\/span> is an ongoing feature series dedicated to providing <span>SMSFs<\/span> (<span>smurfs<\/span>) with valuable news, investment ideas and services, in line with <span>SMSF<\/span> requirements and obligations.<\/strong><\/p>\n<p>\n\t<strong>For an introduction and story archive please visit <span>FNArena&#039;s<\/span> <a href=\"http:\/\/www.fnarena.com\/index4.cfm?type=dsp_newsitem&amp;n=019E6DBA-E499-1790-29AFBD48BCC0AFAD\"><span>SMSFundamentals<\/span><\/a>&nbsp;website.<\/strong><\/p>\n<p>\n\t<br \/>\n\t<em>This story was first published on May 30 for subscribers but is now open to general readership.<\/em><\/p>\n<p>\n\t<br \/>\n\tBy Greg Peel<\/p>\n<p>\n\t<span>SMSFs<\/span> are the largest category of Australian superannuation representing 31.5% of the market and over $<span>490bn<\/span> in funds invested. The rise of <span>SMSFs<\/span> over the past decade reflects a distrust of the big fund manager names in the country and a rejection of their fees and charges which erode super returns. Similarly, <span>SMSFs<\/span> have shied away from financial advisers seen to be connected to large fund managers through commission <span>backhanders<\/span>.<\/p>\n<p>\n\tYet for many <span>SMSFs<\/span>, the maze that is financial market investment is too dangerous a place for the inexperienced investor to go it alone, hence advice is being sought from a newly evolved breed of truly independent financial planners. The importance of financial planning is further enhanced by the need to navigate the minefield of tax implications and ever-shifting government legislation.<\/p>\n<p>\n\tHaving completed a major study of service providers to <span>SMSFs<\/span>, conducted over April-May, <span>CoreData<\/span> has found distinctions between the portfolio allocations of advised trustees and their go-it-alone peers. In short, all trustees have benefited from high returns on term deposits and most still hold shares as their largest allocation. But as interest rates fall and new investment avenues are sought, advised trustees are exhibiting a greater diversification of asset classes.<\/p>\n<p>\n\tThe following table breaks down current portfolio allocations into asset classes, with the blue bars representing all <span>SMSF<\/span> portfolios and the grey bar representing the cohort of <span>SMSFs<\/span> accessing financial advice.<br \/>\n\t&nbsp;<\/p>\n<p>\n\t<img decoding=\"async\" alt=\"\" src=\"http:\/\/www.fnarena.com\/ckfinder\/userfiles\/images\/1305-SMSF-Study-CoreData-Media-Release_Page_1(1).jpg\" style=\"width: 500px;height: 443px\" \/><\/p>\n<p>\n\t<br \/>\n\tAs we can see, equity investment still dominates allocations but cash and term deposits come in second. The difference is that those being advised are less weighted to equities, and to cash, and more weighted to property and fixed income. The implication here is that all <span>SMSFs<\/span> have sought a balance between the safety of cash and the yield available in stocks, but advised <span>SMSFs<\/span> have spread their investments further across other asset classes to enhance this risk\/reward ratio.<\/p>\n<p>\n\tOf particular note is the class of international equities, for which advised <span>SMSFs<\/span> have almost double the allocation of all <span>SMSFs<\/span>. When it comes to international equities, trustees prefer to turn to fund managers, while the majority of trustees make their own domestic stock choices.<\/p>\n<p>\n\t&ldquo;One consistency between <span>SMSF<\/span> Trustees as a whole and advised <span>SMSF<\/span> Trustees has been the high allocations to cash and term deposits within <span>SMSFs<\/span> (versus the larger super funds),&rdquo; notes <span>CoreData<\/span> senior consultant, Angus Dennis. &ldquo;This high allocation has been an effective technique for <span>SMSFs<\/span> to reduce their volatility while maintaining returns through the historic competitive returns of both cash and term deposits in Australia. Now though a changing market environment is leading to a review of this strategy.<\/p>\n<p>\n\t&ldquo;The recent reduction in cash rates to record levels by the <span>RBA<\/span>, appears to be giving <span>SMSF<\/span> Trustees and their advisers cause to consider shifting some funds to other sectors. The interest in shifting from cash and term deposits is more evident in the group of advised <span>SMSF<\/span> Trustees, although all <span>SMSF<\/span> Trustees are also considering moves&rdquo;.<\/p>\n<p>\n\t<span>CoreData<\/span> surveyed not only current portfolio allocations, but allocation intentions among all trustees. The following table outlines those intentions, with advised <span>SMSFs<\/span> on the left and all <span>SMSFs<\/span> on the right. Red bars represent percentage intended decreases in each asset class, blue bars no change, and green bars intended increases.<\/p>\n<p>\n\t&nbsp;<\/p>\n<p>\n\t<img decoding=\"async\" alt=\"\" src=\"http:\/\/www.fnarena.com\/ckfinder\/userfiles\/images\/1305-SMSF-Study-CoreData-Media-Release2_Page_2.jpg\" style=\"width: 620px;height: 407px\" \/><\/p>\n<p>\n\tAgain we can see some noticeable differences. Almost as many total trustees are happy with their allocation in Australian equities as there are advised trustees looking to increase their allocation. What the data are not telling us here, however, is what type of stocks are being invested in or are intended to be invested in, with the obvious split being &ldquo;defensive&rdquo; or &ldquo;yield&rdquo; stocks, which have had a very good run, and &ldquo;cyclical&rdquo; or &ldquo;growth&rdquo; stocks, which are yet to run.<\/p>\n<p>\n\tWhat is very clear is that advised trustees are much keener to further exit cash and deposits as interest rates fall, with a much greater inclination to shift into property and &ldquo;alternative&rdquo; investments.<\/p>\n<p>\n\tIt is no stretch to presume that the total group of <span>SMSFs<\/span> is more inclined to stick with &ldquo;simpler&rdquo; assets, such as shares and deposits, given the large number of trustees choosing not to seek professional advice and a reasonable assumption of inexperience. Those trustees spreading their investment dollars across a wider range of asset classes no doubt reflect a greater &ldquo;knowledge&rdquo; of financial market opportunities, with that knowledge being sourced from investment professionals as well as reflecting knowledge through ongoing personal experience and research.<\/p>\n<p>\n\t&ldquo;In terms of investments generally,&rdquo; says Angus Dennis, &ldquo;it is evident that as the preference for financial control of <span>SMSF<\/span> Trustees rises so too does the investment skill of the <span>SMSF<\/span> Trustees. With control over investment still the number one (37% of Trustees) reason for starting an <span>SMSF<\/span>, service providers need to clearly bear in mind the investment skills of <span>SMSF<\/span> Trustees in their offering&rdquo;.<\/p>\n<p>\n\tAnother notable factor to come out of the <span>CoreData<\/span> study was that of the role of insurance. In July 2010, 13% of trustees had shifted life insurance into their <span>SMSF<\/span> portfolio, while in this 2013 survey that number has risen to 27%.<\/p>\n<p>\n\t&ldquo;For <span>SMSF<\/span> Trustees the top reason for uptake of insurance stated was that it is more financially and tax efficient to have insurance within the <span>SMSF<\/span>,&rdquo; Mr Dennis notes.<\/p>\n<p>\n\t<br \/>\n\t<em><strong>Technical limitations<\/strong><\/em><\/p>\n<p>\n\t<strong><span style=\"font-style: italic\">If you are reading this story through a third party distribution channel and you cannot see charts included<\/span>, <em>we <span><span>apologise<\/span><\/span>, but technical limitations are to blame.<\/em><\/strong><\/p>\n<p>\n\t<em>Find out why <span>FNArena<\/span> subscribers like the service so much: &quot;<a href=\"http:\/\/www.fnarena.com\/index4.cfm?type=dsp_newsitem&amp;n=29EB960D-9DFF-C00E-7F6B464E5D52E250\">Your Feedback (Thank You)<\/a>&quot; &#8211; Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A survey of SMSFs by CoreData finds trustees accessing financial advice are more knowledgeable and have more diversified portfolio allocations than those going it alone, as we shift into a new climate for retirement investment.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[16],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61961"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=61961"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61961\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=61961"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=61961"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=61961"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}