The SMSF landscape has changed drastically over time, and never more rapidly than now, as Millennials jump on board a landscape that was previously dominated by Baby Boomers. According to industry experts, the rise of SMSFs being established by our Millennial population is set to continue. You may be wondering what’s spurring this new wave of younger SMSF investors. We uncover the keys that could open the door to your own SMSF ownership opportunity.
Who are Millennial SMSF Investors?
Also known as ‘Generation Y’ (or Gen Y), Millennials are those who were born between 1981-1996, and account for 10% of all new SMSF accounts being established, according to new data released by the Australian Investment Exchange Limited (AUSIEX). This means that younger SMSF investors now represent the fastest-growing segment of newly established self-managed super funds.
Traditionally owned by those with higher fund balances or members approaching the retirement phase, SMSFs have come into vogue amongst the younger demographic, with more younger people finding the appeal in holding greater control over their investments and financial future.
The ATO SMSF statistics back this up, indicating that historically, entrants to the SMSF space are getting younger and younger.
Why are Millennials starting up SMSFs?
While there’s no proven rhyme or reason, there are some influencing factors that help explain the rapid take up in SMSF accounts by the Millennial generation.
Being known as ‘digital natives’, it’s no wonder that advancements in technology could be playing a huge part into why Millennials are starting their own SMSFs. Access to online information is abundant and instantaneous; often, quite literally, sitting in our hands thanks to the popularity of smartphones. In turn, it is highly probable that this particular group of people hold higher financial literacy than ever seen previously.
Finance has become ‘fashionable’ in a sense, with finance professionals trying their hand at influencing millennials via social media. It seems to be working! The younger demographic have a sound understanding of risk-return financial markets and are trying their hand at digital investing such as cryptocurrencies.
Improved Cost Effectiveness
Cost was historically one of the major barriers to accessing self-managed super funds. Improvements in technology mean that there is access to improved systems and investment product offerings, which makes the cost of managing and maintaining an SMSF far more effective than yester-year.
The improved cost-efficacy of Self-Managed Super Funds has been a hot topic of late, with the SMSF Association recently releasing a report that showcased the true cost of running SMSFs is lower than previously thought.
Unlike generations before then, Millennials are of an age where mandatory superannuation has been around their entire working lives. Resultantly, millennials typically hold larger superannuation balances that are more appropriate for commencing an SMSF. Not only that, but we are now seeing millennials in a life-stage where they are partnered, or marrying and therefore consider combining super balances into a self-managed super fund.
The social and cultural trends of millennials also play a part in the surge of SMSF take up. Ethical Investing is on the forefront of millennials social and cultural morality, making the level of investment choice and control of SMSFs an attractive option for the ethically minded millennial investor.
Superannuation has been a prominent news topic in recent years, prompting conversations around performance, fees and investment options which could have contributed to the surge in new SMSFs by millennials. Legislation to implement the Government’s superannuation reform passed in parliament in late 2016, giving millennials half a decade’s worth of super news to spark thought, conversation and education around their superannuation options. This has been further heightened by the Your Future, Your super reforms coming into effect on the 1st of July 2021. More than ever, the importance of superannuation choice, fees and performance has been impressed upon the wealth accumulator population.
Benefits of SMSFs
With a multitude of influence driving the SMSF surge, millennial SMSF investors are revelling in the undeniable benefits of self-managed super fund ownership. Not only are they at the helm of their own SMSF strategy, but they are taking advantage of lower fees, exercising control of their investment choices through determining their own SMSF investment strategy and even purchasing property through their superannuation fund. One of the stand out differences is that people are able to borrow to invest using SMSF loans to grow their portfolio at quicker rates.
If you’re ready to purchase property through your SMSF, get in touch to discuss your self-managed super fund loan options.