Speaking at an event in Sydney, Colonial First State head of investment sales Laird Abernethy said SMSF trustees who invest “without the discipline and supervision of a financial planner” are likely to fall into behavioural investment traps.
“Without a financial planner they are more likely to exit at the very worst time in a financial crisis,” said Mr Abernethy.
Sanlam Global Investment Solutions head of investments David Itzkovits said it is important to remember there is a “difference between investor and investment returns”.
“There’s a company, Deakin, in the US that actually quantified this – they did a quantitative analysis of investor behaviour,” he explained. “What they did is they looked at the average mutual fund equity investor versus the S&P 500 over 20 years and what they found is that the average mutual fund equity investor underperformed the S&P 500 every year.”
Mr Itzkovits said the underperformance was generally by a significant margin of more than 50 per cent.
“This is because investors make bad decisions, they get in and out at the wrong time,” he said.
Mr Abernethy said investing in managed funds that are exposed to equity indexes but use exchange-traded equity future contracts to reduce volatility may alleviate some of the sequencing risk concerns retirees or SMSF trustees looking to retire might have.
“This allows them to have exposure to equities in a more protected manner so they can get access to the equity risk premium on equity returns without the volatility and sequencing risk issues that they might have in a naked equity type product.”
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That’s another example of superb insight as always demonstrated in your comments across all areas GVC, cheers for that…
Wow! To infer that This is because investors make bad decisions, they get in and out at the wrong time, is a heroic mis-interpretation of the data. Misleading “insights” often come from poorly conducted experiments …. and this one is a ‘doozy’! Mr Itzkovits needs to re-think his experiment before he generalises to Australian SMSF’s.
Aren’t we so lucky to have Financial Planners to save us from our own shortsightedness.
Yet all the stats show that FPs have very little penetration in the SMSF sector. That trend is likely to continue as long as the FP industry continues to make such patronising self serving statements.
Ask any accountant or smsf administrator who sees smsf transactions year after year. We do not see trends of large inappropriate sell-offs of investments or SMSF trustees being “spooked” like these US mutual fund investors you speak of.
SMSF members are not naive and most are far from passive when it comes to understanding their investments.
Being self-directed is what leads people to have an SMSF in the first place so forgive them if they take it more seriously than passive US investors.
Your “discipline & supervision” is not the great panacea the FP industry claims it to be. The SMSF sector in Australia is just fine without your help, thanks very much.