Expectations and experiences of self-managed superannuation fund trustees

Abstract

Self-managed superannuation funds (SMSF) constitute the largest superannuation sector in Australia with the highest total superannuation assets. As at June 2015, SMSF assets approximate AUD600 billion, or equivalent to 37% of Australia’s GDP. SMSFs are managed by fund trustees who are also fund members. The investment risk is fully borne by members. Despite its importance, the sector has not been subjected to as much research interest as other types of institutional superannuation funds. Furthermore, little is known about the individual trustees’ experiences on impact on regulation, risk protection against fraud. In this paper, we investigate the gap between the expectations and satisfactions of SMSF trustees in managing their superannuation assets. Online Survey method is used to gather data on a Likert scale. The survey comprised three sections. The first section of the survey covered demographic information of respondents. The second section aimed at collecting information on the trustees’ expectations. The third section was intended to collect information on trustees’ satisfaction through rating questions covering the cost, control, quality of financial advice, and investment performance when managing their own funds. The ratings of expectations in second section were compared with the ratings of experiences in the third section. The strength of association between ranked variables related to expectations and experiences was tested by Spearman correlation. Wilcoxon tests were also used to provide supporting results in comparing the expectations and experiences. Female or older respondents are more satisfied with fund performance. The satisfaction is correlated positively with fund size, due to the economics of scale in controlling fund costs. Respondents with a higher education level showed increased satisfaction. This may be due to their greater ability to process complex information and make better investment decisions. The difference between trustee expectations and experiences in major areas including the control of investment, cost, investment performance and service quality were not significant. There was a moderately positive correlation between expectations and experiences in regards to cost and control. There was a weakly positive correlation between expectations and experiences in investment performance. The positive correlation between trustees’ expectations and experiences is lowest in financial services. There is no significant misalignment between SMSF trustees’ expectations and experiences in major areas including control, cost, investment performance, and financial service quality. Although the regulation level is high, the protection against frauds and risks are low.