Q: How can you tell that self-managed superannuation funds (SMSFs) are the “hot ticket” with respect to financial services revenue generation? A: When virtually all sectors of the industry are competing for territory.
Notwithstanding the fact that the Australian Institute of Superannuation Trustees (AIST) has had some harsh things to say about SMSFs, and suggestions by some industry fund officials that their members may have been mis-sold into self-managed funds, it was last week announced that Equipsuper Financial Planning would be offering SMSF advice.
This, of course, reflects the compelling nature of the data surrounding SMSFs – they represent the fastest-growing segment of the superannuation industry and boast the greatest accumulation of funds under administration and advice. Further, this has been the reality for more than a decade.
Accountants see SMSFs as still being very much their domain but, in reality, they have become a core focus for financial advisers and now, if the Equipsuper move is an indicator, industry funds are getting in on the act.
Indicative of the attractiveness of the SMSF market were comments by Countplus chief executive Michael Spurr to the company’s annual general meeting last week when he described the sector as “booming” and “very much the preserve of accountants”.
Spurr did so in the context of Countplus not only having created a strong strategy with respect to SMSF establishment and advice, but also with respect to the subsidiary provision of SMSF administration services.
At the same time, the Australian Taxation Office’s (ATO’s) latest annual report suggests that breaches by SMSF trustees are in decline and under control, particularly with respect to the safeguards put in place to ensure they are not used as a vehicle for illegal early release schemes.
Those safeguards include conventional superannuation funds conducting their own due diligence with respect to requests from members to roll their balances into SMSFs, and the ATO closely scrutinising set-up arrangements.
However one thing is also very clear – not all people advised into the establishment of an SMSF are being appropriately advised, with some fundamental rules continuing to be breached, not least around the adequacy of account balances.
Almost from the outset, it has been commonly agreed that, exceptional circumstances aside, people with total account balances of less than $200,000 probably don’t have enough to justify the establishment of an SMSF.
Similarly, it has been conventional wisdom that those being advised to establish an SMSF need to be made fully aware of their responsibilities as trustees and the on-going costs and obligations that are part and parcel of such arrangements.
With the growth in the SMSF arena showing no signs of abating and with new entrants continuing to emerge and to compete in the space, the ATO may find that the optimistic tone expressed in its 2012 annual report hard to sustain over future years.
