First published in the Financial Review on 31 May 2021
Today’s investors have access to markets and trading opportunities which in the past were the exclusive domain of stockbrokers, bankers, and hedge funds.
The SMSF sector has been at the cutting edge of self-directed investing technology for a number of years, says Brisbane-based financial planner MGD’s manager of SMSF Brad Hoffman.
“SMSF trustees were some of the earliest adopters of online banking and share trading platforms,” says Hoffman.
“Now, with the advent of cloud-based accounting systems, the ability for automated bank statements and trading data to feed directly into the accountants’ software has streamlined the management process even further.
“The democratisation of access to markets as a result of internet-enabled trading platforms means that today’s investors have access to markets and trading opportunities which in past generations were the exclusive domain of stockbrokers, bankers, and hedge funds.
“For example, having access to the US stock market gives SMSF trustees access to own some of the world’s largest and most dynamic companies. However, access does not equate to expertise,” he says.
“Just as people specialise in their own fields, so investment professionals spend years or decades learning about particular markets or products, such as interest rates, options, commodities, and sectors. Having the tools to trade a particular market or product doesn’t mean that a person should do so, if they don’t fully understand it.
“This is where the importance of good advice is essential to maximising your super. Remember, superannuation is about investing for decades, not just six months or a year. A failure to properly understand and manage risk can set back retirement plans very quickly,” he says.
SMSF Association supremo John Maroney says the SMSF sector “has been a rapid adopter of technology”.
“This has been helping reduce not just the absolute cost, but also the relative costs compared to larger funds,” he says.
“We think that means SMSFs will be a cost-effective alternative for the younger stages of life.
“Some of the specific technological developments include data feeds, where the information relating to your superannuation investments is going directly from the bank and the investment manager, through to the platform you are using or to your accountant.”
In addition, professional administration firms now focus on high volumes to get some increased efficiencies as well as lower costs to streamline the process of establishing SMSFs.
“Then there’s online investment dashboards offering real-time information and platforms in the marketplace where you can see all of your assets, how they’ve performed on a day-to-day basis and they give you a year to date report or since inception, on your smartphone.
“If you’re dealing with fairly plain vanilla assets where the information is available on pretty much a real-time basis, it can be very low cost and efficient.”
The future will see tech driving down costs even more and providing access to a broader range of investment options, says Maroney.
“There’s a lot of focus on open banking data at the moment where it’s trying to help consumers get a better price and service in the financial sector by making sure that the information they have sitting with banks would cover their credit history or other relevant information can be made available to alternative providers of credit services or other services.
“We expect a similar thing will happen in the superannuation world.
“Some people will be able to instruct their superannuation fund to share their historical information with other potential providers so that people can get comparisons of how the costs would have been if they’d been with a different provider over the last five years and what the investment performance would have been.”