The amount of SMSFs using financial advice has taken its largest ever annual drop despite a surge in the number of funds that have unmet advice needs, according to Investment Trends.

In the last year the number of SMSFs using financial advice dropped from 225,000 to 195,000, the biggest fall since the research firm began collecting data.

It’s not that trustees don’t think they need financial advice; an all-time high 335,000 SMSFs say they have unmet advice needs, an increase from 315,000 in 2019.

It’s a conundrum that Investment Trends chief executive Michael Blomfield called “problematic”. The reason behind it, he said, may be that the advice trustees are receiving isn’t what they’re looking for.

“The number of people who want advice keeps growing but it feels like the advice being given is not hitting the mark for them,” Blomfield said.

Presenting data from the 2020 Vanguard/Investment Trends SMSF Report, the CEO said during the pandemic trustees are mostly looking for help with an investment strategy review, followed by pension strategies and investing for a regular income.

Trustees may be receiving advice in these areas, Blomfield commented, but something is going wrong in the messaging.

“Planners still have a bit of work to do here to build out their value proposition to SMSF retirees,” he said.

A flush market

The 15th annual edition of the report, which canvassed almost 200 advisers and over 3000 SMSF trustees, revealed that the number of SMSFs continues to grow but at a consistently slower rate.

After peaking at a growth rate of 8.7 per cent 42,033 new funds) in 2012, the SMSF growth rate has steadily declined and was 3.3 per cent (20,028 new funds) in the year to September 2019.

While a lot of this can be attributed to a relatively full market – most of the people that want an SMSF already have one – Blomfield said Labor’s ultimately unsuccessful bid to curb franking credit refunds as part of its election campaign may have triggered a wave of regulatory concern.

“SMSF trustees have been saying for a long time it’s just regulatory uncertainty that makes them think twice and three times if SMSFs are the right place to be,” he said.

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