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Which type of SMSF investor are you?

Which type of SMSF investor are you?

Understanding your investment characteristics can help you better tailor your SMSF strategy and goals.

The landscape of self-managed super funds (SMSFs) in Australia has changed considerably over the past decade, resulting in diverse investor profiles that each have distinctive investment attitudes and preferences, according to the CommBank SMSF Report.

The report, jointly published by Commonwealth Bank and the SMSF Association, is based on an online survey of 1,375 Australians from various ages, professions and households, conducted from 25 November to 18 December 2016.

Of those surveyed, 674 were SMSF members that have received advice from financial professionals, 155 were SMSF members that have not, and the remaining 546 were advised public super fund members.

While SMSFs were perceived as exclusive to only sophisticated investors 10 years ago, they are now common tools used by many who want a higher degree of control with their pension plans.

In the 2016 financial year alone, SMSF member accounts rose by 5.5%, while the rest of the country’s superannuation industry declined by 3.4%. Notably, the number of SMSF members has more than doubled since 2004.

SMSF profiles

For individual investors, understanding the four distinctive investor profiles and their particular mindsets is a good starting point to pinpoint their wishes and motivations.

For financial service providers, SMSF trustees’ remarkably different decision-making behaviours and evolving needs suggested that more has to be done to close the gap between existing and anticipated services.

It’s important to note that no one fits neatly into a single profile. Individuals may possess characteristics from different profiles, or move between the categories as their experience and requirements change.

The Outsourcer

“I’d rather someone else do it.”

An Outsourcer prefers one-stop advice and administration services that take the stress out of their fund management.

Coming from various age groups and professions, Outsourcers can be quite different to the traditional stereotype of an SMSF trustee.

Almost two-thirds of them say they are not confident managing their super, while 58% outsource the day-to-day management of their funds. As a result, 97% of them rely on professional advice and are willing to spend more for support, especially from a single adviser such as a financial planner.

While Outsourcers made up only 13% of SMSF members, it’s a segment that’s growing rapidly.

The Coach Seeker

“I’d rather do things myself but I’m looking for someone to help me.”

About one in five SMSF trustees are Coach Seekers, who are eager to learn and willing to ask for help from different experts.

Despite an average age of 53, this group has the highest proportion of younger investors, with one in four under the age of 45.

While a Coach Seeker is more confident than an Outsourcer, they are modest about their abilities and are likely to seek help, often from multiple advisers. The survey shows that 91% of them have an adviser, and 41% have two or more, the highest proportion of any group.

Like Outsourcers, Coach Seekers generally prefer financial planners to accountants to access more wide-ranging advice.

The Self-Directed Investor

“I’m interested in it and I like doing it myself.”

Self-Directed Investors are exceptionally confident in their ability to make investment decisions, and 91% of them say they are confident or very confident managing their funds.

This segment accounts for 30% of SMSF members, and the group most closely resembles traditional perceptions of a typical SMSF trustee – generally older, male, and with the highest proportion of business owners.

Given that they prefer to do things their own way, 37% of Self-Directed Investors don’t have an adviser, by far the largest proportion of any group.

Having said that, when they do seek advice, they are likely to engage an accountant rather than a financial planner.

The Controller

“I’d rather do things myself but I need information to support my decisions.”

Controllers are the largest of the four SMSF investor groups, making up 35% of the members, and are relatively wealthier.  

They have a strong desire to be closely involved in managing their funds, and tend to demand products that offer more individual control.

While they don’t lack confidence, Controllers like to obtain professional advice before they act.

Two in five Controllers use an accountant as their main adviser, and they prefer more specific and transactional advice to the all-inclusive, broader strategy often provided by financial planners.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. The SMSF Report was prepared by Commonwealth Bank of Australia ABN 48 123 123 124, AFSL 234945 (CommBank) together with the SMSF Association ABN 67 103 739 617 to provide general information. It is not intended to replace professional advice. This information has been prepared without considering objectives, financial and taxation situation or needs, before acting on it consider its appropriateness to individual and client needs. Consider seeking professional advice relevant to individual needs. Neither CommBank nor SMSF Association will be liable to them for any loss or damage as a result of the reader relying on this information. While potential SMSF investments have been illustrated within this content they do not represent a comprehensive suite of possible investment products and services within the guidelines pursuant to the SIS Act 1993 with ATO oversight.