The rate of property investment inside self-managed super funds (SMSFs) is considerably lower than expected, according to a joint report from the Financial Services Council (FSC) and UBS.
“Also to the question around leverage, this again was quite low, with regard to people having leveraged property or leveraged equities in their self managed portfolio,” says Bryce Doherty, head of Australia and New Zealand, UBS. “It is in there, but I think it was below 10 per cent,” he adds, while conceding this doesn’t eliminate it as an area of concern.
The State of the Industry 2014 report was launched on Monday by Doherty and John Brogden, chief executive officer, Financial Services Council, during a press conference held at UBS’ Sydney headquarters.
The quantitative study was conducted by GA Research and Kreab Gavin Anderson between October 2-14, 2014, on behalf of the Financial Services Council.
Not all DIY
The report found self-managed superannuation funds are not necessarily ‘do it yourself’(DIY), with a surprisingly high proportion of SMSF trustees receiving financial advice.
“When we’re talking about self managed super, we’re not always talking about DIY funds. Just because someone has a SMSF doesn’t meant they’re not seeking advice from a financial planner, an accountant or another source,” says Doherty.
Flexibility trumps performance
The report also disproved other preconceived ideas about why people established SMSFs.
“My personal view was that people went into self managed super funds because they wanted better investment outcomes,” Doherty says.
Instead, he says the research showed the main driver was a desire for more control and flexibility around their superannuation.
“Investments did show up there, but it was number three or four.
“That provides a very good guide as to what we should be doing and how we should be moving to provide solutions for consumers,” Doherty says.
This was also supported by the survey’s finding that 35 per cent of SMSF balances were under $200,000.
“It goes to the point that consumers are exercising that choice, that they do want that choice and flexibility around their super account,” he adds.
Where do SMSF investors come from?
Where a majority of new SMSF trustees are rolling their superannuation from was also a surprising outcome.
It showed that 15 per cent of SMSFs among those surveyed were opening a superannuation fund for the first time. “The rest were coming from industry funds, retail funds and government funds, and in that order,” Doherty says.
Thirty-eight per cent of respondents came from an Industry Super Fund, 30 per cent from a retail fund, 20 per cent from a government super fund and 7 per cent didn’t know.
This was an unexpected finding. “I personally had the view, before we did the research, that probably the retail sector would have driven the most people across.”
