SMSF trustees show thirst for mFund access

Investment Trends analyst King Loong Choi.


By Julie May

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Nearly 70 per cent of self-managed super fund (SMSF) trustees who plan to invest more heavily in managed funds over the next 12 months would be open to using a service that allows them to trade managed funds in a similar manner to which they trade shares, research has shown.

According to the Investment Trends “2014 SMSF Investor Report”, which was based on a survey of 2163 SMSF trustees, 67 per cent who planned to be more active in the managed funds space said they would be open to doing so via a service similar to the Australian Securities Exchange’s (ASX) share trading platform.

Investment Trends analyst King Loong Choi told financialobserver  nearly 40 per cent of all those surveyed showed an interest in such a service.

“While interest in managed funds is steadily increasing, there are still many trustees [54 per cent] who aren’t interested,” Choi said, highlighting that 43 per cent cited barriers to using managed funds as a major issue, something the ASX mFund Settlement Service could help them to overcome.

SMSF trustees were also hesitant to use managed funds due to reasons such as not wanting to use financial advisers, the feeling investment platform costs were too high and because application processes were deemed too difficult, which were also factors mFund could help mitigate, he said.

He said while nearly 70 per cent of trustees keen on investing more in managed funds would be open to using a service such as mFund, they still required connectivity to the service via brokers.

“[While nine brokers have established connectivity to the service], ANZ’s Etrade [which has signed on as an mFund foundation member], CommSec, Nabtrade and Westpac Online Investing are yet to do so and collectively they represent 76 per cent of the online broking market share,” he said.

“Because these four represent such a large proportion of the market and they haven’t established connectivity, this is creating a hindrance to mFund and SMSF investors wanting new ways to participate in the managed funds market.”

Connectivity via the larger brokers would lead to a greater take-up of managed funds by trustees, he added, highlighting that trustees noted many advantages to having access.

“The major reason those surveyed said they would be interested in such a service was simplicity and convenience, particularly as it would reduce paperwork significantly,” he said.

“Other reasons that were cited were it would provide greater access to international investments, which is something trustees are looking for.”

Cost benefits and lower fees were also perceived benefits, according to those who took part in the research.

“This survey was compiled in April [a month before mFund was officially launched], so we may see even greater openness to using managed funds and such a service the next time we do this report,” Choi said.

Further, according to the Investment Trends “2014 SMSF Planner Report”, which was based on a survey of 489 financial planners and completed at the same time, 49 per cent of SMSF specialists, those with more than 20 SMSF clients, said they were open to using mFund.

Meanwhile, only 29 per cent of SMSF generalists, those with one to 20 SMSF clients, said they would be open to doing so.

In addition, planners said they expected mFund to lead to an increase in the use of managed funds among SMSF clients, but indicated it could come at the expense of flows onto investment platforms.

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