The April 2014 Self Managed Super Fund Report - recently published by Vanguard and specialist researcher Investment Trends - groups SMSF trustees into three categories in regard to financial advice: delegators, validators and self-directed. This is based on their responses to a comprehensive survey.

As their category suggests, the "delegators" among SMSF trustees are not comfortable in making investment decisions on their own and leave all of the investment decision-making for their fund to a professional adviser.

The "validators" are comfortable with picking investments for their SMSFs yet look to advisers for such things as getting second opinions, accessing their technical knowledge and gaining access to a wider range of investments. By contrast, "self-directed" trustees are not interested in obtaining financial advice.

In responding to the survey, SMSF trustees were permitted to give multiple answers to the questions regarding their use of advisers. Investment Trends found that:

• 10 per cent of SMSF trustees are delegators - up from 7 per cent in the previous 12 months.
• 44 per cent of trustees are validators - up from 36 per cent in the previous 12 months.
• 41 per cent of trustees are self-directed - down from 50 per cent in the previous 12 months.

Interestingly, the percentage of SMSF trustees who are delegators, validators or a mix of both has not been higher in the six years that Investment Trends has asked about their relationship with advisers.

It is a worthwhile exercise for SMSF trustees, and all investors for that matter, to think about whether they should obtain professional advice and about how to use that advice to their best advantage.

In the next few weeks, Smart Investing will take a closer look at the relationship between SMSFs and their advisers, including the use advisers as "behavioural coaches" to encourage sound, disciplined investment practices for the long-term.

By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
14th August 2014