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Unadvised SMSFs lack investment insight

investment unadvised SMSF

SMSF trustees running their own investments lack the depth of knowledge to make the best investment decisions and should steer away from do-it-yourself solutions.

Unadvised SMSF trustees and members may have access to a wide range of investment vehicles and asset classes, but lack the insight needed to ensure their asset allocation and portfolio mix are appropriate for their needs, according to the head of a digital investment platform.

OpenInvest chief executive Andrew Varlamos said the SMSF sector was built upon specialist accounting and advice firms giving people the means to make decisions around the running of their own superannuation fund and while some have retained the services of a professional adviser, many now rely on online trading and broking platforms that provide no guidance.

“There are any number of online brokers and they are growing all the time with the same message, which is ‘open an account, log on and do any trading you like with us’, while brokerage fees are coming down week after week,” Varlamos told smstrusteenews.

“But where does the unadvised SMSF trustee get help and guidance as to where they should be investing? How do you get a diversified portfolio in that situation?”

He said unadvised trustees could use financial advisers for that service, but this carried a significant cost factor, they could use a digital solution that provides access to blue-chip professional portfolio management or they could use online trading services and attempt to find the best asset allocation for their needs.

“Asset allocation is a specialist skill and despite three-quarters of SMSF trustees not having an investment adviser, surveys have shown that trustees understand the importance of asset allocation,” he noted.

“If we then say that it is really important to be exposed to the global economy outside of Australia and there are 200 exchange-traded funds on the ASX (Australian Securities Exchange), many with international shares, the problem you have to solve if you are an SMSF trustee is how do I allocate to different economies?

“This also applies to different asset classes as well because if a trustee decides to be exposed to the US, should that be in large caps, small caps, tech stocks, fixed interest or infrastructure?

“Typically, the answer to this question is ‘go and pay for advice’, which does not help SMSF trustees unsure about where to find advice nor does it help investors who don’t have enough money to get started.

“That’s what we’re trying to solve at OpenInvest, where we have three global asset managers available on our marketplace who have got teams of people focused on these issues.

“When they make changes to the asset allocation of your portfolio, OpenInvest implement them and investors know they have got a managed portfolio looked after by one of the world’s biggest asset managers.”

OpenInvest currently offered investments via BlackRock, Schroders and J.P Morgan Asset Management and Varlamos revealed it will be adding a fourth leading asset manager to its platform in the coming months.

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