Planners leveraging SMSFs

Australian financial planners now earn up to a quarter of their revenue from self-managed superannuation funds (SMSFs), according to new data released by research house Investment Trends.

The research, released today, also confirms earlier findings that in the wake of the global financial crisis SMSF trustees are returning to financial planners, albeit that they remain firmly focused on their own agendas.

According to Investment Trends analyst Recep Peker, SMSFs generated $890 million for the planning industry in the past year — a 19 per cent increase over the year to June, 2009.

However Peker said that this was partly driven by an increase in annual fees, with the average amount charged per SMSF rising from $3,500 to $3,800 a year.

Peker said that notwithstanding the increasing importance of SMSFs to their practices, planners were still facing significant challenges in servicing the SMSF market with the great challenges being compliance issues, accountants setting up SMSFs for clients who were not suitable, administration and educating clients about their responsibilities as trustees.

“Our research shows that both planners and their clients continue to struggle with the exacting compliance regime governing SMSFs,” he said. “That suggests there are still significant opportunities for service providers to step in and relieve planners of some of the compliance burden.”

Peker said that the research had shown that although 73 per cent of planners currently advise SMSFs, only 37 per cent use an administration service for their clients, with 20 per cent doing all administration in-house while 43 per cent use an accountant.

He said that in circumstances where, on average, planners were prepared to pay $1,500 upfront and $1,900 a year in ongoing fees per SMSF, this increased propensity for outsourcing represented a growth opportunity for specialist support providers.