Author: Sam Green / Tuesday, February 24, 2015 / Categories: Mikes Blog

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Recent negative press in the wake of the global financial crisis has led increasing numbers of Australians abandoning the traditional financial planning models.

In the lead up to the GFC, many Australians had taken a back seat, to be led by their financial advisers. However, the effects of the GFC, combined with recent high-profile financial planning scandals has no doubt caused many Australians to realise it is prudent to be more involved in their financial planning or, in fact, to take the lead role.

The information age has left the average Australian more financially savvy and educated than ever before. Information previously only available to advisers is now usually available to retail investors, which has levelled the playing field.

What is surprising is that it has taken this long for Australians to play a larger role in the management of their money; given that historically, around 70% of professional Australian fund managers underperform the market. It is not simply that these fund managers underperform, rather once you start deducting hefty planning and management fees it becomes increasingly difficult to exceed the market return.

However, there are many index tracking funds that are listed on the ASX that closely match the return of the market (and therefore exceed the performance of many managed funds). OzFinancial offers a direct equity index-tracking Vantage20 portfolio service.

Tellingly, the registration of self-managed superfunds in Australia has also steadily increased post-GFC. Since 2010, total members of Australian SMSFs have risen from 787,544 to over 1,030,000 members by December 2014; a rise of more than 30 percent in just a few short years. Indeed, Australian self-managed superannuation funds now own around 16 percent of the local share market. This doesnt necessarily indicate that these SMSFs wont have financial planners (and many will), rather that Australians are deciding to take closer control of their own money.

From another perspective, the newly-found financial independence of many Australians is starting to hurt some of our largest wealth managers. In the half-year ended 31 December 2014, Commonwealth Banks Wealth Management division recorded a 12 percent fall on profits from the first half of the year. This contraction occurred as the financial planning scandals gained broad-based press attention, after a rise in profit for the first half of the year.

If you are one of the many people looking at becoming self-directed, make sure you do your homework and educate yourself.

Being educated at the very least can help you make sure you are getting the right advice from your planner, if you are wanting to take a lead role it can help you save a lot on money in expensive fees.