Significant growth in the self-managed super fund (SMSF) market means more specialist training is required for financial planners in order to satisfy the needs of SMSF clients, according to Vanguard Investments head of corporate affairs and market development Robin Bowerman.
The Vanguard / Investment Trends 2011 SMSF Planner Report revealed that total annual industry revenue generated by SMSFs for planners has exceeded $1 billion for the first time, and with almost half of advisers surveyed expecting to be recommending the use of SMSFs more often going forward, that growth is likely to continue, Vanguard stated.
The number of challenges cited by planners in relation to servicing SMSFs continued to grow, and the biggest challenge identified was the falling caps on concessional contributions, Bowerman said.
Other challenges included educating clients about their responsibilities as trustees; administration; some accountants setting up SMSFs for clients who are unsuitable; and keeping fees competitive.
Growth from SMSF clients had not matched planners’ past expectations, the report found.
In the 2008 survey, planners anticipated revenue from SMSF clients would rise to 32 per cent of their business by 2011, but planners currently estimate the actual revenue from SMSF clients at 24 per cent of total practice revenue.
The outlook for the sector is still positive; while 42 per cent of planners said they would keep their recommendations regarding SMSFs at the same level in the next year, 44 per cent said they plan to increase them.
The three chief reasons for making more SMSF recommendations were increased client demand (67 per cent); clients wanting greater control, and greater flexibility over investment decisions, (both 66 per cent).
Planners need to consider a different approach to servicing this market, and the research shows they favour more of a partnership or coaching approach, said Investment Trends Principal Mark Johnston.
Competitive fees and a clearly articulated value proposition remain areas where planners understand that the industry has work to do, he said.
