AMP’s decision to tap into the SMSF space created quite a buzz in the industry. Paul Sainsbury explains the decision was only logical, outlining a few factors financial planners and accountants should look for in a SMSF administrator.
More than a few eyebrows were raised earlier this year when AMP announced its move into the self-managed super fund (SMSF) space with the creation of AMP SMSF.
We all know self-managed super funds constitute the fastest growing superannuation sector in Australia as more Australians become engaged with, and seek greater control of, their super.
But what was Australia’s largest retail super provider with the largest financial planning network doing in a space where the whole premise was around people managing their own funds?
After all, AMP already had a SMSF presence with its Multiport administration business and 49 per cent share in SuperIQ.
But its acquisition of Adelaide-based administrator Cavendish and the establishment of a stand-alone business unit focusing on SMSFs signalled its intention to play a bigger role.
To answer the question of why, I want to first look at the term ‘self-managed’ and at the SMSF customer.
The term ‘self-managed’ is a bit of a misnomer.
Almost all self-managed super fund trustees have a trusted adviser in some form – whether it’s their accountant, a stockbroker, a financial adviser or a friend or family member.
While SMSF clients want greater control and flexibility, they also want high quality advice as well as access to attractive investment options and efficient administration support without the risk of compliance breaches.
So increasingly trustees are looking for additional help to manage their SMSFs, especially as their balances grow larger and the compliance risks grow.
And more often than not they are turning to financial advisers, accountants and administration service providers for this extra help.
There are some services that naturally fall into the category where trustees will seek support – like tax advice, transitioning to the pension phase, and audit.
But they are also looking for support in accessing and selecting investment options, developing an investment plan and for professional administration services in general as regulation requirements become more complex.
Research looking at what satisfies SMSFs with the advice or support they receive shows that their adviser’s technical knowledge, the timing of recommendations made, knowledge of different investment options and selecting the right investments were the key drivers of satisfaction.
So these are the areas where financial advisers, accountants and stockbrokers can really add value – and the use of more professional administration services by them is increasingly critical if they are to meet these drivers of satisfaction and have a successful business.
If we flip the table and look at what the challenges are for SMSF service providers like financial planners and accountants, we see that keeping up with regulatory changes, particularly in light of recent Government talk about a greater focus on the SMSF sector, is a key challenge.
Also important is compliance, administration and educating clients about their trustee responsibilities, which are becoming more complicated.
Attempts to address some of these challenges have been behind the emergence of the SMSF professional administration businesses, which now administer more than 10 per cent of SMSFs in Australia.
A contemporary SMSF administration system can help solve these challenges and can help drive greater economic returns as planners and accountants’ time is freed up to concentrate on what is driving the needs of trustees, such as investment strategy and advice.
The increase in technology in professional administration is making SMSF administration more efficient and cost effective and should help drive future growth.
The continuing move towards SMSFs seems inevitable – it’s now the largest superannuation sector and is growing at a more rapid rate than the retail or industry fund superannuation market.
It will become more common for existing customers of financial advisers, accountants and stockbrokers to demand that their financial adviser has the skills to help enable them to transition to the SMSF superannuation environment when they feel the time is right for them.
So what should a financial planner, accountant or stockbroker look for in an SMSF administrator?
- Service and more service via an administration platform. Most traditional platforms were built to support the adviser/accountant rather than the client.
But with the SMSF market becoming even more competitive, advisers should look at client service as a point of difference.
Look for a contemporary platform that delivers the flexibility that enables the adviser to deliver the type of support and service that the client wants. - This means an intelligent and intuitive administration platform which delivers to the adviser and the client efficient SMSF set-up, compliance and administration automation and can remind you what tasks need doing at the right time.
This frees up time to focus on the important investment advice for the trustee. Look for features like up-to-date data delivery, no double keying of data, straight-through processing, and ease of implementing investment decisions. - Real time overview of your clients super fund position. If you’ve ever experienced the frustration of ‘information lag’ – the difference between when you need to know your exact financial position and when you actually know it (usually when you lodge your tax return) – you’ll understand how important real time information can be.
- Quality service versus low price. Don’t underestimate how important quality service delivery is to SMSF – this often translates into greater client longevity than other client segments.
- Focus on the future. Make sure that your administration platform provider has the resources and scale to continue to invest in its SMSF administration system to take advantage not only of technology advances but investment and product trends.
- Technical support and education. An administrator who can provide the accountant or the planner with access to the deep technical knowledge and understanding that will be increasingly required to operate in this market.
Paul Sainsbury is the managing director of AMP SMSF.
