Regulatory changes still plaguing SMSFs
Close to a third of SMSF trustees have ranked regulatory uncertainty as the hardest aspect in running their fund, with those at the higher and lower end of the asset scale most concerned.
The 2017 Vanguard and Investment Trends SMSF Report revealed that 31 per cent of SMSFs were concerned by regulatory uncertainty, with an identical number struggling to choose what to invest in.
With the raft of super regulatory changes effective this year, SMSF trustees with assets totalling more than $2.5 million were most concerned, with 82 per cent worried, while 73 per cent of SMSFs with less than $500,000 also expressed concern.
“When you have so much volatility and uncertainty you would expect that this would be one of the hardest things with an SMSF,” said Investment Trends research director Recep III Peker.
“Although the number of SMSFs continues to grow each year, the rate of growth has slowed over the last four years.
“While there was some concern among SMSF trustees about these changes, they seem to have largely remained informed about the implications, and the large increase in SMSF assets could be in part attributed to SMSFs taking advantage of higher caps prior to 1 July this year.”
The report revealed a slight increase in trustees seeking to diversify their investment portfolio, with 55 per cent saying that more than half of their portfolio was invested in one investment type, down from 60 per cent in 2016.
The intention to use ETFs, resource stocks, and residential property in 2017 saw positive reversals as compared to previous years, with SMSFs planning to invest in 2.8 investments in 2017, as compared to 2.6 last year.
“We’ve seen a gradual improvement in the diversification of SMSF portfolios over several years but a clear bias towards the local sharemarket and property persist,” said Vanguard head of market strategy and communications Robin Bowerman.
“This is understandable, given Australia’s long-held affinity with direct property investment and with the flow of franking credits from Australian shares.
“But by excluding less familiar asset classes like international shares and bonds, SMSFs are depriving themselves of some highly valuable opportunities for diversification.”