Women taking more control of their finances and trading through SMSFs
A growing number of women are taking control of their finances by opening a Self-Managed Superannuation Fund (SMSF) to trade stocks and exchange-traded funds (ETFs) on the Australian share market, AUSIEX data shows.
Women accounted for one in three new SMSF account openings in the first two months of 2022, up from one in four through 2021, accelerating a recent trend of growing direct participation in share market trading.
A generational shift may be underway with women aged 18 to 32 accounting for the highest share of female SMSF clients across the AUSIEX book. Women represented 35.6% of accounts for the 23 to 27 year age group, according to AUSIEX data.
These figures highlight the acceleration of a recent trend toward women taking greater control of their finances. The share of women opening new accounts has been growing strongly for the past three years and reached 33.06% in the first six weeks of 2022, while the male share of account openings has fallen from 80% to 66.94% over the same period.
While the overall book of SMSF facilities remains heavily skewed to men, 79% to 21%, there are significant differences across the SMSF segment.
Of direct clients, 25.37% were women, whereas female clients represented 19.03% of advised clients and 20.93% of advised clients who accessed AUSIEX via a wrap platform.
Looking at the broader market for financial advice, by 31 October 2021, female clients represented the majority for all advised clients (SMSF and Non-SMSF) thanks to an increased proportion of newer clients on-boarded during 2021.
New investor generations take charge
The rise of female investors is part of a wider trend of young investors taking control of their finances by opening SMSFs and using them to invest in stocks and ETF’s.
The results would appear to defy the conventional assumption that investors need substantial balances to make running an SMSF worthwhile. AUSIEX revealed that clients aged 18 - 24 have been opening direct accounts to trade on their own, rather than through an adviser.
Over the past decade, Millennials' (born between 1981 and 1996) share of new account openings has risen fourfold to 6%. The trend is even more pronounced in direct accounts rather than advised, with nearly one in six new SMSF accounts opened since 2020 belonging to a millennial client. Generation Z, born between 1997 and 2012, has risen to 4% since 2015.
The data shows that the direct book has more than double the share of younger clients compared to the advised segment. "This is responsible investing in action; young people taking control of their future cash flows" John Rose, Senior Manager - Business Intelligence at AUSIEX.
Faster to trade once account opened
Direct (Retail) SMSF accounts opened at the start of the pandemic in Australia (March / April 2020) surged to become the largest segment for new accounts for 4 months. This coincided with the Federal Government allowing a temporary early release from superannuation funds to help households cope with the economy-wide shutdown to deal with the Covid-19 pandemic.
A SMSF account is 44% more likely to trade compared to a non-SMSF account, the data shows. Within 12 months of opening, 41.2% of accounts traded, compared to an average of 23% across the entire book. More significantly, the activation rate for SMSF accounts was 31% in the 12 months to October 2021, suggesting those accounts have been more active in the past few months.
Overall, the number of days to first trade has dropped dramatically in the past 10 years; down from 180 days to just 11 days in early 2022, signalling greater trading intent from investors. The days to first trade fell by nearly three quarters from 39 days in 2021 to just 11 in the first weeks of 2022.
Buying the dips
Investors trading via AUSIEX shrugged off the volatility in markets during January 2022 and were net buyers of shares and ETFs. With inflation running hot and central banks starting to raise rates, global stock markets plunged in the first weeks of the year. The S&P ASX 200 Index ended January 6.3% lower, taking a cue from Wall Street, where the prospect of rising rates saw prices for tech stocks and other growth companies driven sharply lower.
For the AUSIEX SMSF book, however, around 1 in 6 SMSF accounts traded in January. This included a small cohort of 200 SMSF accounts that were opened in previous years, but traded for the first time in January 2022. Some accounts over 20 years old, traded for the first time.
The average daily "buy" percentage for the SMSF segment was 57.3% in January 2022. All bar two days (1 January and 20 January), ended as net buy days.
From 28 January to 11 February 2022, activity was skewed 60% to buys before turning into a pattern of a very close day (almost 50:50).
We may see in years to come that events such as International Women’s Day not only encourage greater participation in trading directly or indirectly, but it will be women who take the lead in passing on their real-world financial knowledge and experience onto future generations.