SMSFs want advice but aren’t getting it

The number of Self-Managed Superannuation Funds (SMSFs) using a financial planner is tumbling, but over 200,000 SMSF users want advice and aren't getting it, according to new Investment Trends data.

Investment Trends Senior Analyst, King Loong Choi said that the number of people who had a SMSF and sought advice fell to 36 per cent in 2015, down from 41 per cent in 2014.

He said the main reason was because of the heavy media scrutiny about the financial planning industry at the time the data was compiled in April 2015.

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Choi said, the research house surveyed 3,941 SMSF trustees and the data found four subsequent reasons demand for financial planners declined.

One was that trustees wanted to manage their own affairs themselves, two, was the lack of confidence in advisers' expertise, three, was that they had a previous bad experience with a planner and lastly they cited they couldn't trust advisers "which is in line with what had been in the headlines when we conducted the study".

However, he believed there was a big opportunity for advice, as 213,000 SMSF trustees had "an unmet advice need".

He said, they didn't want advice about investment strategy, but instead wanted strategy advice on estate planning, advice on pensions, the age pension, offshore investing, longevity protection and transition to retirement (TTR).

"Among those with unmet advice needs, only 54 per cent intend to turn to a financial planner and while 51 per cent intend to turn to an accountant his represents a significant opportunity," Choi said.

He said both accountants and planners had already made moves to take advantage of this.

Choi said, nearly all of the most successful planners in the SMSF space had a working relationship with an accounting firm but a challenge they faced "was the lack of integration between planners and accountants systems, which represents an opportunity for technology providers" so they could both work collaboratively.

 




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Comments

Comments

so many opportunities!

Good article. You are quite correct. I "don't want advice about investment strategy, but instead wanted strategy advice on estate planning, advice on pensions, the age pension, and transition to retirement (TTR).

The big bugbear I have with advisors however is that they don't like to give limited specific information and advice. They were taught to always start at the beginning with a 40 page questionnaire, and then to charge $2,000 for a "financial plan", and only then to move on to the specific items that the customer wants to address! NO! I refuse to play that game again.

Ssmith, I have a few SMSF trustees I work for by the hour on strategy only, and one off pieces of work , so it can be done, just look around a bit more, we are out there.

@ smithy -How much would you pay ? What this article fails to address is the reason why trustees have unmet needs for advice and the comments not raised here from the survey saying Trustee's would not be prepared to pay any more than say $400 for the advice. The reason being is the advice industry is over-regulated. It's clear by ssmith3104 that there are trustees out there, that don't want the security of the existing consumer protection mechanisms that are in place. They much prefer not to have any protection of the law at all. Sadly unlike the US which voted not to introduce best interest legislation advisers in Australia are bound by best interest laws and thus must embark on a time wasting exercise to have the relevant evidence & provide consumers like smithy with protection. To provide any type of advice around product (and SMSF is a product) is a break even exercise at best when charged in the hundreds of dollars. Would trustee's be prepared to pay say $800 around starting a pension, a TRIS strategy, with discussion around beneficiaries ? I've quoted as low as $800 and many have said it's too much. The true cost of this exercise is likely $2,000 as indicated, to cover time just wasted on the ''scope of advice'' setting out all the implications of scoping things out, the letters of engagements, the payment consents, the compliance with anti money laundering legislation etc etc. It is legislation over kill and perhaps until trustee's have the right to waive away this best interest obligations, or compliance is reduced, there will always be unmet advice needs.

Hi ssmtih. You may have a bugbear. But legally is it against the law to not know your client. and as you and the SMSF are 2 separate legal entities you are not going to get legal advice without lots of questions first. The law is written that way. (ASIC set and monitor the regulations not advisers) Also advisers have a fiducary duty to advise you in an area even if you don't want it. bit like a doctor who looks for and notices a malignant tumour, but ignored it because you went in for a flu injection. You may not like the "game", but don't be upset that advisers follow the laws. Good luck with finding a good person to work with, who does not want to know your details and also the SMSF details.....

Not exactly. I am an ASIC licensed insurance broker. Most of the time we give a "general advice warning" saying that we have no or only superficial knowledge of their financial and legal position and therefore our advice is general only and cannot be relied upon beyond that. Sometimes we delve into things in more detail in which case we define our role differently (but still define it with regard to our P.I. cover). The result is that WE CAN give limited, targeted, and specific advice that does not require us to gather tons of information about ALL of their circumstances, nor study that, nor include those things into our advice. A financial planner should be prepared to operate in the same manner.

it still has to be documented. And that's the cost, $440? pfft, that's gone in 1 meeting, a few calcs etc, The document costs another $400 minimum to prepare. Simply not worth it when there's lots of comprehensive advice to provide, that's the problem. Accountants will however fill some of this space under their new licensing arrangement, and they love hourly fees.

All well and good to provide general advice with limited information until the client receives completely incorrect advice due to not 'knowing your client' and then drags you through the coals.

I wouldn't be comfortable providing advice that I don't know is definitely the best for the client. Financial Planning is far different to insurance broking and for good reason.

Always thought it's weird that Self Managed Super Funds are "swimming outside the flags" when it comes to consumer protection (when trustees are doing the investments) but as soon as an adviser is engaged to assist, that part is all of a sudden "swimming inside the flags" again...or is it?

Three questions Smithy... 1) so what would your average commission be for selling me a General Advice insurance policy, and 2) Who pays for that? You seem to be reasonably educated so hopefully you won't say I, the consumer don't pay anything. 3) Finally what would you be prepared to pay for advice?

Most of the Financial Planners who have responded (negatively) to my comments make me think that if they were chefs running a restaurant, they they would not allow somebody to come into their restaurant and simply buy one dish. No, they would need to complete a 30 page questionnaire about their food history, present circumstances, and dietary objectives. Then the chef would respond by giving them a 10 page nutritional Plan. Then they would be required to purchase a 4 course meal, or nothing. Hmmm.

Smithy - you give "Quotes" we give "Advice", big difference. You're argument makes no sense. You say you want advice on specific areas of your circumstances but you want the Adviser to do that using a General Advice disclaimer, so it wouldn't be personalised advice at all. How can someone give you advice if they don't know anything about you? Very strange post that shows how you and the general public have no idea of the kind of regulation we face every day. Do you seriously think we want to spend 6 hours on documentation purely so we can comply with the law. You wait until LIF comes in and commissions won't subsidize full advice any longer......you won't get an SOA from Adviser for under $3k.

SSMith surely you understand we need to collect some information, and consider alternatives and make sure any advice is legal and above board and matches goals and objectives in case of any potential legal action down the track. Sometimes we can scope out advice, other times we just cant. SMSF Trustees are a little different, usually they know what they are doing so just need pointers here and there, for example do my investment strategy, is my insurance tailored correctly, can I move this policy into my SMSF etc, on the other hand Mr and Mrs Jones looking for a life insurance policy, well yes we need to know its tailored and in the best interest of the client, there is a little more paperwork, but then we can stand by advice, we don't just say sorry Mr Jones I just sold you that product on general advice, I didn't take into account your personal circumstances you have a complaint sorry I cant help see the ombudsman. That's not helping people SS, its just selling product, most the planners I work with don't want to just sell product, we want to help people achieve goals, when you do that you need to know a lot more about people.

I can understand your frustration and would like to think I am the type of adviser that would help anybody that asks for help. It would be very difficult for me (or any other licenced adviser) to provide strategic advice in relation to pension commencements without knowing quite a bit of info. Whilst the client may think it's just a simple piece of advice, unfortunately the reality is it is not simple or isolated. The tax, social security, superannuation systems all interact with each other. Pulling one lever can cause unintended consequences. If I started a TTR for someone without knowing their tax position (which means I will need to know about all of their assets, liabilities, associated entities, likely future income) I could leave a client in a worse off position, which would fail my Best Interest Duty, which means I've failed to help the client. It's because of this interaction with most other aspects that it is very rarely as simple as thinking of financial planning as a restaurant that serves up dishes to the public for them to choose of their own accord. Bottom line for me is that if a client wont answer my questions in relation to a matter that I think is relevant to the advice being sort (I'm not talking about having to fill out a standard 30 page questionnaire, Im talking about getting the answers to tailored questions relevant to the advice being sought) then I wont provide the advice. If General Advice is all clients are after, plenty of info available via the ATO and other bodies and there are plenty of "restaurants" where you can just buy the "dish" that you want (online legal doc producers for Pensions, Wills, Binding Nominations etc).

ssmith3104 - I think everyone has been pretty kind considering your clear lack of knowledge on the compliance requirements of financial planning.

What you are asking for is just simply not legally feasible. Take it up with ASIC and those putting the legislation in place. To use your analogy, you're trying to be a head chef here but you have no cooking experience.

Not all SMSF Trustees deserve to be involved with a financial planner either.

Smith3104 your chef/restaurant analogy stupendously sucks. The closest such a nonsensical comparison would be in eating analogies would be if you were going to Jenny Craig for a specific eating outcome, they would have an extensive questionnaire as well (i.e. legume intolerant/allegries etc) and likely have to charge more overall as a total service package due to all the precautions and 'getting to know you'.

You are trying to compare a Jenny Craig service with McDonalds - seems to be in the same area, but just ludicrous to even attempt to anyone with a modicum of knowledge or intelligence.

"Advice" is not a transactional activity, If you are after information, go Google it.

If you want decent solid appropriate advice, be prepared to answer important questions and pay the market rate which is essentially enforced on us.

If you are a cheap Macca's type person, don't go complaining about the classy restaurant down the road, clearly it is not for you,

Correct Smithy - and my suggestion to you and anyone that is looking for a quick meal is don't eat at that restaurant. I am one of those advisers who deliberately seek out clients who want comprehensive advice. That's the business I am building. I am not interested in transactors - I want clients in my practice who want an ongoing advice relationship that encompasses strategy and product solutions (when/if required) that fall out of a comprehensive discovery process. Feel free to soak up as many transactors as you want - that may well suit a retail price driven product intensive business but that's not the business I am in.

Good on ya Smithy. I get angry mysefl every day when I push away ordinary Australians from seeking great advice, because they can't afford my fee and an hourly rate based on signing a dozen pieces of paper to implement a simple transaction.. However be mindful , when you seek advice at least the planner knows what they don't know. Most trustee's don't even know what they don't know. and like it was mentioned, the interaction with all the tax, social security levers and how they interrelate require a proper process to be followed. Yes, That process needs to be made simpler and more affordable. The comments here and the article just really highlight how far reality and consumer expectations are apart. Consumers want advice but the advice industry can't meet that service because of over regulation. Over regulation as a result of Union Run Industry super funds having the majority of say at the FoFA table. We've got best interest laws & fines under criminal law now, but whose PI or Dealer groups fees have decreased. We've a lot of work to do. But don't blame planners saying we're not playing the game, blame the Labor Government, we're just operating within the goal posts they set, without consultation with the players.. Articles like this, that kinda indicate planners are missing an opportunity also serve no purposes other than again trying to blame planners, when the article should be written on the basis of consumers want advice, but can't get it because of red tape. if you want to help the system don't vote for Labor.

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