Financial planners are enjoying some success targeting specific segments of the self-managed superannuation fund (SMSF) market, gaining significant traction with the younger generation in particular.
However advisers looking to service the SMSF market may struggle to build an ongoing relationship with clients who increasingly seek advice at specific times rather than full-service or holistic advice.
A new report from Macquarie Bank and the SMSF Professionals’ Association of Australia Limited (SPAA), released at the association’s technical conference in Sydney yesterday, found advisers need to tailor advice to clients at a generational level.
Talking about the generations
The SMSF Generations Report concludes that while there is no such thing as a typical SMSF investor, a great deal can be learnt from how the various generations transact.
Macquarie Banking and Financial Services Group analytics research manager, Gary Lembit, says that investors across the generations recognise the value of advice when managing their SMSFs, but that advisers should tailor their approach according to life stage to have the greatest impact.
“It is clear that one of the main reasons investors opt for an SMSF is to have greater control and choice over their investments. However, this does not mean they want to be entirely self-directed.” He said.
“As the insights in this report show, SMSF investors across the generations recognise the role financial advisers have to play in providing valuable guidance on their investments.
“However, through better understanding their clients’ state of mind, advisers can adapt their advice models and learn to communicate in a way that better meets their needs, while articulating the value they can add.”
While generally confident in many aspects of their lives, Generation Y acknowledge the need for assistance in making long-term investment decisions and, according to the report, are very receptive to advice but do not always know where to find it.
Generation X is a lot more sceptical about financial advice, but being time poor, they are willing to pay for advice in certain situations, particularly if it helps save time.
The Baby Boomers are increasingly seeking advice, perhaps because of the higher amount in their funds and being closest to retirement, while the Silent Generation (those in retirement) is by far the most likely generation to seek advice.
Customisation and misconceptions
Andrea Slattery, chief executive of SPAA, said that as the number of investors using SMSFs grows, the industry needs to respond by focusing more on what they can do to best service this distinct group.
“We have found time and time again that investors who use SMSFs are the most engaged people in superannuation. They want to make sure their funds perform well and are interested in understanding what is involved to help make this happen,” she said.
“This includes accessing financial advice, which these investors show a continuing appetite for but, as this report has shown, the advice industry can make their role even more effective by tailoring their approach to the stage of life the investor is in.”
Slattery added that the perception that SMSF’s are “hard or complex” is changing and urged delegates to stress the partnership aspect to trustees – self-managed rather than DIY.
Face up to it
Lembit addressed another misconception, claiming face-to-face contact with clients has never been more important than it is today. However he had a few suggestions on the nature of this contact.
“Advisers should be looking to offer quick, sharp, punchy meetings and operate outside of the usual nine-to-five to appeal to Generation X and Y,” he says.
“The SMSF market is now quite mature and with the diversity of advice out there, people are increasingly looking for a second opinion.”
It is this need for clarification and reinforcement that is assisting the advice industry in demonstrating its value to SMSF investors and, as Slattery noted, financial advisers are for the first time showing up alongside accountants as trusted professionals.
In addition to highlighting the differing attitudes towards advice, the report provides a snapshot of the SMSF asset allocation preferences among the generations.
As a general trend, cash/near-cash holdings and direct shares in SMSFs have increased in recent years, while managed-fund holdings have decreased.
“We have always known that the cash holdings in SMSFs as at June 30 each year is not a true indication of the cash that is held throughout the year,” says Slattery.
“This report highlights what trustees really do when they have control and flexibility and how they choose their assets to hold, including cash/near-cash assets.”
