Advisers should nudge SMSF trustees into diversification
Financial advisers need to take on the challenge of persuading self-managed super clients to adopt more diversified investment portfolios, says Russell Investments.
“Advisers need to provide influence without taking control,” he said. “They should nudge clients in the direction of diversification without confrontation.”
Schoenheimer said advising SMSF trustees was a particular challenge as a majority of clients in this space highly value their independence and control over investment decisions.
Advisers need to develop particular skills for meeting this challenge, countering the “preference for control and preference for the familiar” displayed by many SMSF trustees, he said.
The comments follow the release of research conducted by Russell Investments in association with CoreData, which found a strong preference for particular asset classes – namely Australian equities and cash/fixed interest – among SMSF trustees.
While, according to the Intimate with Self-Managed Super report, more than 60 per cent of SMSF trustees display a “strong or very strong investment knowledge” in the eyes of their advisers, opportunities for greater diversification should be created, Schoenheimer said.
“Advisers need to think of formats and vehicles through which SMSF clients will be comfortable investing in asset classes such as international equities, rather than simply stock picking,” he said.