“This idea of specialisation, if you think about every other profession, is exactly what works. When you talk about accountants you have insolvency specialists, you have corporate specialists, you have tax specialists. The other analogy is, of course, the medical profession … it’s the same thing. This is where we will probably end up.”
For financial planning firms, specialisation is also the winning tool to set your business apart from other competitors, says Shirlow.
“One means is to go down the track of attaining specialist knowledge and maintaining it,” he says.
“As a director of SPAA, one of the really obvious things to do would be to put advisers through the SPAA specialist accreditation.”
The SMSF Specialist Adviser and SMSF Specialist Auditor brands have been recognised as the professional accreditation program set by SPAA, demonstrating a proficient benchmark of skills, knowledge and responsibility.
‘If you want to target the SMSF market, you’re going to need to do these things’
A probable risk for financial planners and firms that do not consider SMSF knowledge requirements and basic guidelines is that they will be left behind, according to Smythe.
“If you want to target the SMSF market, you’re going to need to do these things,” he says.
“That’s where the market’s going and it’s the kind of service providers SMSF trustees want to deal with. It’s really about where the planner wants to take the business. If they seriously and genuinely want to be a port of call for an SMSF trustee, then that’s where they’ll have to go because their competitors are going to be there.”
Shirlow says that the shape of impending specialist knowledge will also involve a high understanding of the role and responsibilities of the trustee, so that any advice given will ensure that an SMSF is successfully run.
“What the SMSF component requires is a focus on understanding what a trustee of a fund needs to do to comply with the Superannuation Industry Supervision Act and [also] understanding what a trustee needs to do to operate a fund,” he says.
“There’s a lot of expertise involved in advising any client on their super and I wouldn’t be surprised to see higher standards [continuing to] be required of advisers.
“Your typical client in the Australian workforce is going to be a member of a super fund; and part of your advice for a typical client, whether they’ve got a self-managed fund or not, will be [informing them of] … investment-focused advice, advice focused on contribution levels or retirement plans.”
However, pushing specialisation as the industry framework is not fully embraced by everyone.
Michael Lorimer, chairman of the Small Independent Super Funds Association (SISFA), says an adviser’s overall competency and qualifications are more critical.
“My professional opinion is that [specialisation] is not absolutely required,” he says.
“It would be risky to label someone as a specialist because the relevant theme of the appropriate training upfront and ongoing education for SMSFs could become [overlooked].
“And certainly, the opportunities for financial planners in this space have always been there. Financial planners will become more involved in SMSFs; they’re almost there but not all the way.”
An SMSF adviser’s role is one that also requires a project management approach, says Michael Hallinan, super counsel at Townsends Business & Corporate Lawyers.
“For many people who aren’t in the SMSF sector, when they’re dealing with a client, they aren’t dealing with other service providers in relation to that client,” he says.
“Whereas if you’re in the SMSF sector, there are going to be a number of service providers you’ll have to deal with; for instance, the administrator of the fund, a legal adviser, the auditor. You’re going to have to liaise with and develop relationships with them.
“So advisers can be moving from an environment where they very much were the sole [person involved] with the client’s financial investments and they’re now moving to an environment where they’re dealing with other service providers [who are] also dealing with that client’s financial investments.”
Potentially, SMSF auditors will suffer the biggest changes from the Cooper Review, so financial planners must also monitor the changes their collaborators are undergoing, says Negline.
ASIC will require SMSF auditors to register with them and abide by new competency, knowledge and independence standards.
“Auditors have themselves to blame,” he says.
“They did it to themselves; they didn’t solve the problem. Demands on their work will continue to grow and definitely their costs will grow.”
Negline says the transformation of the auditor’s role will be “an interesting space to watch” during the year.
La Greca adds that another aspect financial planners need to be wary of is that the “expectation of what a client wants out of their SMSF is slowly being raised”.
“The nature of the client profile of an SMSF is not the same as it used to be,” he says.
“[Before], it was the small business owner, but it’s no longer the case. Now people in senior management and executive roles have started to look at these things as their own sort of options.
“The traditional paradigm of how you looked after self-managed super is going to change and it’s going to have to align itself with clients’ expectations of super funds.”
Then there is the initial and end pieces of the puzzle – pitching and pricing.
Proficiency in offering SMSF advice to trustees needs to be highlighted, according to Sue Viskovic, managing director at Elixir Consulting.
She says an SMSF adviser’s value proposition needs to have a “less vanilla approach” as it requires more than just traditional listed assets to be offered, to a very specific target market.
Viskovic says new competitors need an “ability to articulate why their service stands above and beyond other advice, and [to] tap into all the benefits that all SMSFs can bring”.
The next challenge is determining a pricing model.
Viskovic believes SMSF advice tends to be at “the premium end of the marketplace”, but pricing advice is “not just plucking a number”.
A fee can be struck that is both reasonable for the individual business offering the advice, and which is also competitive with fees charged by other bsuinesses.
Service offerings should be defined, both for the adviser and for each client to understand why they are paying that amount, Viskovic says.
“If you’re adding value by bringing in a direct equity, higher-level asset allocation advice or technical tax strategies, that is worth a higher fee than an average run of the mill price,” Viskovic says.
From a legal point of view, Bryce Figot, senior associate at DBA Lawyers, warns potential and current SMSF advisers of the need to adhere to compliance rules.
“I’d emphasise that it’s done correctly with an eye for compliance…it’s about principles,” he says.
For trustees that misbehave, usually by borrowing money from the fund, the ATO has taken significant portions of money as a penalty, even if it means the fund becomes insolvent or leaves clients with no retirement money.
“This means the adviser was dropping the ball,” Figot says.
“Clients don’t know any better, and so there are now very significant and negative outcomes. Three to four years ago, the ATO would only [penalise] a handful of funds every year, about five or six; but each year it’s increased significantly.
“From 2005 to 2006, 12 funds were found to be non-complying, but this number grew to 200 for the period from 2009 to 2010.
“Greater opportunities exist, but you have to be mindful to comply with the rules,” he says. “If you do it with nicer detail, you can really add a lot of value for clients.”
