Blink and you’ve missed it. Self-managed superannuation fund (SMSF) assets currently account for one third ($450 billion) of Australia’s $1.4 trillion total superannuation asset pool, and continue to grow.
The numbers speak for themselves, with net SMSF establishments for the 2012 financial year up 38.9 per cent to 37,174 – the highest year of growth since the onset of the global financial crisis (GFC). Concurrently, SMSF wind-ups fell 43.1 per cent to a historical low of 3,644 over the same period.
No matter how much established superannuation funds close their eyes and wish this growth data away, it’s not likely to happen. Rather, super funds, fund managers and insurance companies alike are trying to get their heads around the SMSF space and work out how best to leverage this growth within their own businesses.
For super funds, it’s a case of how to best engage and retain members; in the case of fund managers it’s about better understanding SMSF trustee investment decisions and preferences; and insurance companies want to understand the insurance needs of trustees and how they can potentially offer group-life-like insurance arrangements for SMSFs with multiple members.
The regulatory road ahead
There is no doubt that constant regulatory change is causing uncertainty amongst SMSF advisers and trustees and in many cases influencing whether trustees invest within the superannuation system or invest outside of it.
However, will constant regulatory change impact the continued growth of SMSFs substantially? I think this is unlikely, particularly if you consider that intention to set up SMSFs remains strong, with the appeal extending to younger demographics, and the increased desire among consumers for flexibility and control fuelling the sector’s growth.
All participants in the sector have to accept the fact that SMSFs will face increased scrutiny, to which they will have to adapt. In some cases this will open up opportunities, so that advisers can, for example, broaden their offer to provide insurance advice, with the requirement for SMSF trustees to consider insurance as part of their investment strategy under the Stronger Super reforms.
One key area of regulatory change is the new limited licensing regime for accountants, which is likely to encourage more referral arrangements between accountants and planners, greater focus on accountants among licensees and greater crossover between accountants and planners when it comes to financial planning.
However, rather than view this as a threat, financial planners should see this as an opportunity and in fact many feel that it’s a non-event since they already have a broader advice offer than accountants are able to provide.
Salvador Saiz is head of Advice, Wealth and Super at CoreData. A second instalment from Saiz will look more closely at SMSF trustee behaviour and intentions after research produced by CoreData on behalf of Russell Investments and the SMSF Professionals’ Association of Australia is released next week.
