The Super Revolution

Posted by Daniel Joseph

At the recent business partner briefing we spoke about the world of the Self Managed Super Fund. In short, it’s not just the new super environment; we see it as a financial revolution. This is because on average in the past financial year there have been over 184 Australians PER DAY starting an SMSF, double the number in 2010. There is no other sector of the financial industry that is experiencing this exponential growth, and we expect this trend to continue.

There is obviously good reason for this recent stampede into a new form of financial freedom. A couple of the more noteworthy ones include:

The Australian superannuation industry lost $18.5 billion of its clients’ money in the last financial year

Out of the 16 million people in super funds Australia wide, 6 million Australians would have been better off keeping their money in their mattress during 2007-2012 than in their super

Of the 83 default super options available (2007 – 2012), 51 delivered negative annual returns

Why is this the case?

One key reason may be that since 1988 (when the earliest data became available), the industry has gone from a 25% exposure in Australian shares to a 43% exposure. We as a country have one of the highest exposures in the world in our super to more volatile equities.

So what does the current SMSF environment, where so many Australians are now moving their money to, look like? Who are the members and what are they investing in?

As of June 2012, the latest available figures, there are 913,550 SMSF members. This is all the more impressive when you consider that this is less than 1/16th of the super population, but SMSF asset values make up over 1/3rd of the super industry. The overwhelming majority (over 90%) of SMSFs are composed of either a single person or couples, with 72% of members on incomes under $100,000 – showing SMSFs are no longer just for high income earners – middle Australia is now joining the revolution.

Traditionally, cash and blue chip equities have been the assets of choice for members, but since legislation was changed in 2007 to allow SMSFs to borrow money, property as a percentage of SMSFs has markedly increased and now sits at over 15% of the asset pool, up from 11% in 2007. We expect this to continue as more and more Australians start to take control of their future and take advantage of this financial opportunity.

Posted by Daniel Joseph, on 21st Feb 2013