Financial planners consistently overestimate the amount of revenue they will derive from self-managed superannuation fund clients, but those who foster relationships with accounting firms are far better placed to meet targets.
While the Vanguard and Investment Trends Self-Managed Super Fund Planner Report covered a range of investor and adviser issues, a recurring theme was the increasing polarisation of the successful and unsuccessful in the SMSF space.
The report, which surveyed more than 400 advisers, revealed that some are racing ahead of the pack in servicing SMSF investors, while others struggle to demonstrate their value.
However, a common factor seems to be optimism, no matter how misplaced this has been, with SMSFs generating just 22 per cent of total practice revenue in the 12 months to April 2013.
“Back in 2010, planners were getting 27 per cent of their total practice revenue from SMSFs and, at the time, expected to be getting 38 per cent of their practice revenue from SMSFs by 2013,” said Investment Trends senior analyst Recep Ill Peker. “But that hasn’t really materialised. They are actually struggling in this space… and there are a few challenges that are preventing them from winning.”
These include the fall in caps on concessional contributions, compliance and regulatory uncertainty.
Dos and don’ts
But what do SMSF specialists, who typically service 20 or more SMSF clients, do that SMSF generalists, with fewer than 20 such clients, do not?
To start with, 73 per cent of planners provide advice on SMSFs, a percentage that has remained steady over the past seven years. Of this number, the report identifies 48 per cent as SMSF generalists and 25 per cent as specialists.
Advisers who said they are succeeding in attracting and retaining SMSF clients were more likely to say their value proposition resonates with SMSFs, they work closely with (or in) accounting firms and do the administration for SMSF investors in house.
In short, they seem to understand the SMSF investors need for control, a point reinforced by those struggling in this area who put their lack of success down to clients being “too self-directed, have a DIY attitude and won’t give away control”.
Generalists also indicated they were being challenged by competition from accounting firms, which they perceive as “having a better grip” on SMSFs, while specialists have strong relationships or referral arrangements with several accounting firms.
While some advisers have strong working relationships with accountants, two in five report having had some issues involving accountants in which SMSFs were being established for clients inappropriately.
Nearly half (48 per cent) of advisers said that the regulatory reform on limited licensing for accountants will have a positive impact on their overall business income and 34 per cent expect it will increase their SMSF client base.
SMSF specialists were much more likely to work for an accountancy firm (27 per cent) and slightly more had several accountants referring work to them.
Many advisers are struggling with SMSF’s because their business models are not geared to SMSF’s. Their clients want control and direct ownership of assets. But the advisers are pushing wraps and managed funds inside SMSF’s. This is why I am having success showing financial advisers how to transition their business models if they want to succeed in the SMSF space.