Diversification a key marker of advised SMSFs: AUSIEX

The latest edition of wholesale trading platform AUSIEX’s ‘SMSF Under Advice’ report has found key differences in the asset allocation decisions of self-managed super funds (SMSFs) when considering their financial advice or generational status.

SMSFs who had engaged with financial advice were more likely to have a diversified portfolio across investment vehicles and asset classes, featuring more holdings in passive exchange traded funds (ETFs), active ETFs, listed investment companies (LICs), listed investment trust (LIT) hybrids and and Australian Real Estate Investment Trusts (A-REITs) than self-directed SMSFs.

Brett Grant, Head of Product, Customer Experience and Marketing at AUSIEX, said the report found advised SMSFs had increased their allocation to ETFs, while self-direct SMSFs and non-SMSF retail accounts largely preferred direct investments in equities.

“Advised SMSFs also tend to be more diversified in terms of the number of unique securities held as well as sector allocations.  For example, advised SMSF accounts held 15 securities on average, in comparison to 12 for self-directed SMSFs.

“The extent to which financial advisers can add value to their clients’ portfolios throughout the market cycle was again evident in this year’s analysis.”

The report also indicated there were some differences in asset allocation choices when comparing generations, as advised Generation X SMSF holders preferred healthcare stocks while advised Millennial SMSFs were more inclined towards industrials, real estate and consumer discretionary stocks.

The report found that as younger people continue to monopolise new trading account data, the appetite for assets such as cryptocurrency and crypto-infrastructure ETFs continued to soar, more than doubling (218%) across all SMSF accounts in the final quarter of the 2024 calendar year.

“It appears evident that younger SMSFs investors may have different trading preferences to their parents, not just because of their stage of life but also due to their familiarity with securities such as exchange traded funds and even cryptocurrency,” he said.

“Another asset allocation issue which will continue to attract significant industry attention going forward is the phasing out of bank hybrids following the announcement by the Australian Prudential Regulatory Authority (APRA).

“It will be interesting to see what the investment industry produces as alternatives and what investors will shift towards – and we have already seen some product managers respond with an increase in fixed income ETFs.”

Environmental, social and governance seemed to also be more valued among advised SMSFs, accounting for 2.7% of their total exchange traded products (ETPs) portfolio value.

“As we look ahead into the 2025 calendar year, a federal election, threatened trade tariffs, potential rate cuts and a record high S&P/ASXASX200 SMSF investors, advisers and trustees have much to grapple with,” Grant said.

“However, our analysis continues to paint a picture of advised SMSFs as well-diversified, active, agile and forward-looking investors, well-positioned to navigate challenging conditions and grow their wealth.

“That said, advisers need to ensure their value proposition is well known and understood, especially considering our data found a year-on-year fall in the proportion of new advised Generation X accounts, when the broader trend and that on the self-directed side is towards this generation growing in terms of its significance as a controller of overall wealth in the system.”