Industry fund members eye SMSFs

Industry superannuation fund members have been showing more interest in establishing a self-managed superannuation fund (SMSF) than their retail fund peers, according to new research from Investment Trends.

The research, sponsored by Vanguard Australia, reveals that SMSF establishments are on the rise and that financial advisers have had a growing influence over the new set-ups.

It said the total number of SMSFs climbed from 612,000 at the end of 2023 to a record 638,000 by the end of 2024 following the creation of 25,969 new funds. The combined assets from the new funds, along with strong investment gains over the period, helped lift total SMSF assets to more than $1 trillion for the first time.

The research found that SMSF set-up interest is rebounding, with industry fund members showing slightly higher intent – driven more by perceptions around performance than their retail peers.

It said that of total SMSF inflows in 2024, 57% reflected rollovers from industry funds and a further 23% of rollovers frm retail funds.

The top motivations cited for setting up an SMSF were more control over investments (65%), achieving better returns (38%), and having greater transparency of investments (31%).

However, many of those who have set up an SMSF noted they still have a separate super account alongside their own fund, which is primarily to access cheaper insurance coverage, for diversification purposes, and in case they decide to switch back their super in the future.

As in other years, the Investment Trends research continued to identify SMSFs as a significant market opportunity for financial advisers,

The number of SMSFs using financial advisers grew to 155,000 in 2024, up from 140,000 in 2023. But this means 483,000 SMSFs – the vast bulk of the sector – are not using a financial adviser.

“Although Australia’s SMSF sector is continuing to grow, the research for this year’s report clearly highlights that there are significant advice gaps for many individuals operating their own super fund,” Vanguard Australia Chief of Personal Investor, Renae Smith said.

“Only 24% of SMSFs currently use a financial adviser, which is not ideal when you think of the many complexities associated with managing superannuation including keeping track of changes in rules and regulations, administration, taxes, choosing what to invest in, and then personal considerations such as retirement income needs and estate planning.”

The latest research found that advised SMSFs are more likely to report advice gaps around intergenerational wealth transfers (29%) and estate planning (37%), while newly established SMSFs are far more focused on tax minimisation (37%), insurance (26%), and purchasing an investment property (25%). Tax and retirement planning represent the largest cluster of unmet needs, impacting 280,000 SMSFs.

Barriers to closing the advice gap remain complex. Among advised SMSFs, a lack of holistic advice is increasingly cited (23%, up from 16%), while cost (33%) stands out as the primary hurdle for newly established SMSFs.