Recent research from the Self Managed Super Fund (SMSF) Association and National Australia Bank (NAB) Trade, entitled Intimate with SMSFs is an illuminating insight into the operation of Australia’s half a million plus SMSFs.

The research indicates that SMSFs are helping their members become more confident in meeting their retirement goals.  When asked, over two-thirds (69.1%) of those with SMSFs have indicated that they are confident that they are on track to fund their desired retirement income.  By comparison, only 35.2% of those without an SMSF are confident.

It is highly unlikely that simply setting up an SMSF would put someone in a better financial position.  Those with SMSFs do however become more involved in their finances, start thinking about a retirement plan and have a much better understanding of where they are placed.  By taking on more responsibility for their retirement, SMSF investors appear to gain greater confidence in where they are headed.

This engagement in their retirement planning also leads those with SMSFs to realise that there are many areas where they need some help.  SMSF members seek professional financial advice more than others (52.8% vs. 29.5%).  The education and expert assistance these people get by engaging with an adviser may also be contributing to their greater levels of confidence.

While SMSF members generally appear to be better placed, it is also evident that many could also be doing a better job of managing their investments.

For example, about 27% of all money in SMSFs are in cash and term deposits.  While some cash is essential, it does come at a cost.  As an example of this, let’s have a look at the performance for various asset classes over the 2014/15 financial year;

[global-url list="snapshots" key="ALL"]ALL[/global-url]	[global-url list="snapshots" key="AGL"]AGL[/global-url]	[global-url list="snapshots" key="AMP"]AMP[/global-url]	[global-url list="snapshots" key="ANN"]ANN[/global-url]	[global-url list="snapshots" key="ANZ"]ANZ[/global-url]	[global-url list="snapshots" key="ASX"]ASX[/global-url]	[global-url list="snapshots" key="AZJ"]AZJ[/global-url]
[global-url list="snapshots" key="BHP"]BHP[/global-url]	[global-url list="snapshots" key="BOQ"]BOQ[/global-url]	[global-url list="snapshots" key="BPT"]BPT[/global-url]	[global-url list="snapshots" key="BXB"]BXB[/global-url]	[global-url list="snapshots" key="CBA"]CBA[/global-url]	[global-url list="snapshots" key="CCL"]CCL[/global-url]	[global-url list="snapshots" key="CTX"]CTX[/global-url]
[global-url list="snapshots" key="DOW"]DOW[/global-url]	[global-url list="snapshots" key="FLT"]FLT[/global-url]	[global-url list="snapshots" key="GPT"]GPT[/global-url]	[global-url list="snapshots" key="HSO"]HSO[/global-url]	[global-url list="snapshots" key="JHG"]JHG[/global-url]	[global-url list="snapshots" key="JHX"]JHX[/global-url]	[global-url list="snapshots" key="LLC"]LLC[/global-url]
[global-url list="snapshots" key="MQG"]MQG[/global-url]	[global-url list="snapshots" key="NAB"]NAB[/global-url]	[global-url list="snapshots" key="ORG"]ORG[/global-url]	[global-url list="snapshots" key="OSH"]OSH[/global-url]	[global-url list="snapshots" key="PPT"]PPT[/global-url]	[global-url list="snapshots" key="QBE"]QBE[/global-url]	[global-url list="snapshots" key="RIO"]RIO[/global-url]
[global-url list="snapshots" key="RMD"]RMD[/global-url]	[global-url list="snapshots" key="SEK"]SEK[/global-url]	[global-url list="snapshots" key="SHL"]SHL[/global-url]	[global-url list="snapshots" key="SUN"]SUN[/global-url]	[global-url list="snapshots" key="TAH"]TAH[/global-url]	[global-url list="snapshots" key="TLS"]TLS[/global-url]	[global-url list="snapshots" key="WBC"]WBC[/global-url]
[global-url list="snapshots" key="WES"]WES[/global-url]	[global-url list="snapshots" key="WFD"]WFD[/global-url]	[global-url list="snapshots" key="WOW"]WOW[/global-url]	[global-url list="snapshots" key="WPL"]WPL[/global-url]

As can be seen, more than a quarter of the $550 billion in self managed super was in the two worst performing asset classes.  Holding some cash is an important part of an investment strategy to provide liquidity and manage risk.  However, the top reason given to researchers for holding cash by 42.9% of SMSF investors was “I am waiting for a better option”.  It seems that every option was a better one last year.

No investor can successfully pick the best performing sector each year.  Therefore smart investors will develop an investment strategy that meets their long term requirements and then be disciplined in sticking with it.  Those who were holding surplus cash, waiting for the perfect time to invest, would have been better off having such a strategy and simply implementing it.

Perhaps this is why SMSF members are more and more seeking assistance from professional advisers.  An increasing trend has been SMSFs outsourcing investment to professionals.  47% now outsource investment research, up from 35.5% two years ago.  47.6% now rely on someone else to acquire and dispose of assets, up from 27.2% over the same period.

It seems that while SMSF’s are more popular than ever; Trustees are taking on more advice, which in turn is boosting confidence for their retirement.

SMSFs are not for everyone.  It depends on an individual’s circumstances, needs and goals as to whether an SMSF is suitable.  However, investors taking the step to start an SMSF are doing something right.  Instead of sitting back hoping they have enough, they are being proactive and seeking advice to ensure they have enough. As John F Kennedy once said “There are risks and costs to action. But they are far less than the long range risks of comfortable inaction”.

If you would like to discuss your SMSF options, one of our advisers can help you. Please call 1300 ELSTON or email info@elston.com.au

Source: Intimate with Self-Managed Superannuation – A snapshot of Trustee findings – 2015.  An annual study of Self-Managed Superannuation Funds Prepared by CoreData for nabtrade and the SMSF Association.