Out of sight, out of mind – that was a common description of superannuation in the past. However, AUSIEX trading data is now painting a different picture.

More younger Australians are taking greater control of their financial future, despite market uncertainty in recent years, by opening SMSFs.

Data from AUSIEX shows during FY22 Q1 (July to September), there was a 9.3% increase in new SMSF accounts opened compared to FY21 Q1. 

Gen Y or Millennials (born 1981–1996) represent the fastest-growing segment of new SMSF accounts. 2020 onwards has seen a new pattern emerge, with this group representing 10% of all new accounts - double the rates seen from 2016 to 2019. 

During FY21, there was also an emerging trend in SMSF accounts opened by Gen Z (born 1997– 2012). The number of SMSF accounts owned by Gen Z investors has doubled in the past 12 months.

AUSIEX CEO, Eric Blewitt, said recent years of government and regulatory reviews of the super system has most likely prompted greater awareness of super among younger Australians. "SMSFs have traditionally been the domain of those with higher fund balances and those approaching the decumulation phase," said Mr Blewitt. 

"SMSFs may be appealing to younger people due to the fact they provide greater control over investments."

Mr Blewitt said the data was consistent with AUSIEX's report Australia's Trading Transformation, released in June, which found a 250% increase in self-directed investors under the age of 25 trading during the initial COVID lockdown in Australia through to March 2021.

"All of this data is painting a picture of much greater interest from younger people in taking control of their financial goals", he said. 

SMSF Association Deputy CEO and Direct of Policy and Education, Peter Burgess, said younger individuals have more access to information than they ever have before about all financial matters, including SMSFs. “Whether it has been through social media or other avenues, younger individuals  are feeling more empowered to take control and engage with their super,” said Mr Burgess. 

Will Mackay, Principal Adviser at Mackay Private, said he and his team are seeing younger clients who are far better informed about the market and opportunities. “What they want is a diverse range of investment options including access to overseas markets and specific investments themes such as tech or crypto. We are also seeing younger people investing with a long-term view rather than trying to make a quick buck – they are taking a long view but are acting quicker than older investors.

“Generally, they do have a good initial understanding of SMSFs, but we do reinforce that there are lots of ongoing requirements with having an SMSF.”

In recent years, female SMSF account holders have increased, with the male to female ratio for new SMSF account holders now 1 to 1.33. One in three Gen Y/ Gen Z investors is female. This is consistent with data published in Australia's Trading Transformation report, which showed 52% of new trading accounts opened in the 12 months to March 2021 were by women. 

Peter Burgess noted that there has also been an increase in female SMSF members. “Again, I think we are seeing the same driving force with females as we are young individuals where they are feeling more confident and informed and not so daunted at the thought of managing their own fund.”

The AUSIEX SMSF accounts have grown by an average of 5% for each of the last three years and is made up of 53% Advised (advised clients and advised clients via a platform), and 47% directly held accounts. Advised SMSF new accounts have seen a renewed increase since June 2021, with September 2021 representing a 16-month high. 

Chris Hill, State Manager, Queensland, AUSIEX, said the pandemic has shown many people their true disposable income position. This has caused many people to carefully consider their financial position in earnest for the first time. “There is no doubt there is more information out there than there has ever been, but it can be a bit of a minefield – those people who do have some money tucked away are usually the ones who are open to seeking good financial advice.” 

Highly active traders, but less so in ETFs 

Over time, AUSIEX has found that SMSF accounts are 30% more likely to trade compared to non-SMSF accounts. SMSF accounts activate faster than non-SMSF accounts, with more than half trading within 90 days of being opened (54%) compared to only 42% of non-SMSF accounts.

SMSF accounts have executed 20% of all AUSIEX trades since 1 January 2020. Since SMSFs are 10% of all AUSIEX accounts, trading is double the expected amount compared to size. 

The top ten most traded stocks for the SMSF segment are heavily weighted towards blue chips, with BHP, Westpac, CBA, NAB, Woodside Petroleum, CSL, ANZ, Fortescue Metals, Macquarie Bank, and Telstra making the list.

However, SMSF accounts are less invested in ETFs compared to other accounts. New accounts held by Gen Z surprisingly have the lowest percentage of ETF investments (19.23%) in their SMSF compared to all older generations, who sit between a range of 27% to 32%. 

Those that traded ETFs tended to favour Australian Equities or US Equity ETFs, such as Vanguard US Total Market Shares Index ETF (VTS), iShares Core S&P 500 ETF (IVV), and BetaShares Nasdaq 100 ETF (NDQ). AUSIEX also saw some initial interest amongst SMSF investors in newer MegaTrend ETFs, such as ETFS Semiconductor ETF (SEMI), ETFS Hydrogen ETF (HGEN) and very strong interest in BetaShares' Global Cybersecurity ETF (HACK).

Advisers are key 

"The long-held view that Australians do not actively engage with their super until they near retirement looks to be changing," said Mr Blewitt. "However, this data raises questions whether advisers and fund managers might need to pivot to attract and retain clients who appear to be paying much more attention to their super and the investments within." 

Will Mackay said working with younger clients requires a different approach. “Younger clients come to us with far more specific requests. You have to go to meetings with these clients with a very open mind and prepared to discuss a far wider range of investment opportunities.”

According to Chris Hill, greater interest in super and investing may inevitably lead more Australians to seek professional advice. “SMSFs done correctly are a great vehicle for the right people. But it is important people fully understand the mechanics and we would always recommend seeking good advice.”

Peter Burgess said advisers add value if they can also provide assistance around compliance and administration. “We know from research that they are the two biggest pain points for SMSF trustees,  particularly younger individuals who may not be as experienced when it comes to administration and making investment decisions,” said Mr Burgess.

“We know that SMSF trustees of all ages value expertise. Being able to have a recognised designation, such as our Specialist SMSF Advisor designation, around providing SMSF advice is something that is very important.

“We do expect continued strong growth in the SMSF sector into the future. However, it’s certainly not about the SMSF sector becoming the biggest in the superannuation industry. It has always been about ensuring that the right people have SMSFs and that they have access to quality advice,” said Mr Burgess. 

 AUSIEX was named Adviser's Choice for Australian Shares at the SMSF Service Provider Awards for 2021 and Advice Platform Provider at the 2021 SMSF Awards.