Self-managed superannuation funds (SMSFs) could be a suitable vehicle for much younger investors rather than being restricted to investors nearing , according to Hewison Private Wealth.
“There are a lot of perceptions around SMSFs in that they are really only appropriate and applicable for the older investor; someone who has a million dollars and approaching retirement,” Hewison Private Wealth director and private client adviser Andrew Hewison told InvestorDaily.
“I don’t think any age bracket should be placed upon SMSFs. It really comes down to a matter of appropriateness for the individual [as] self-managed superannuation is just another superannuation option that should be given appropriate consideration.”
According Australian Taxation Office figures from June, approximately 15 per cent of SMSFs holders were aged under 45 years old, which suggested that the younger demographics were also taking a more personalised approach to retirement.
In particular, SMSFs had become popular with young business owners, such as tradespeople, looking to include their business real property into their fund, Mr Hewison said.
“We have some SMSF clients who are Gen Y so age should be taken out of the equation.
“If you’re a successful young entrepreneur at 25 years of age and you’ve decided to put a spare $450,000 into super, a SMSF is just as appropriate for you as it is for a 55 year old.”
He said it was vital that young SMSF investors sought financial advice and professional guidance as they tended to have less time to focus on their superannuation, compared to those who were nearing retirement.
However, financial advisers were not targeting younger SMSF investors, nor seeing the market segment as an opportunity, Mr Hewison said.
“I don’t think they do,” he said.
“The majority of advisers are after the established client, particularly in the area of self-managed superannuation so it’s not an area that’s being covered very well.
“The aging population means a lot of advisers out there are going to have an aging client base so you need clients that are going to be able to grow with your firm, thus younger investors are certainly on our radar.”
Furthermore, higher fees have been a hindrance for younger investors to consider a SMSF, Mr Hewison said.
“With SMSFs, the first thing people are told to look out for is the fees.
“While we do recognise that you do need to have a minimum amount to make it cost effective, you might be paying half to 1 per cent more for a SMSF but if you can outperform your current superannuation provider by half or 1 per cent, which isn’t a great deal, you’re already at break-even.”
By: Krystine Lumanta