Financial planners aligned to accounting firms are winning the battle for self-managed super fund business, but new research has found the SMSF sector has significant unmet advice needs, potentially creating opportunity for specialists.
Vanguard and researcher Investment Trends this week released the results of a Self-Managed Super Fund Planner Report based on research conducted in April and examining how Australian financial planners interact with SMSF investors.
Remarkably, the research found that 224,000 out of the 503,000 total number of SMSFs conceded that they had unmet advice needs, with almost all of these (218,000) indicating they would be prepared to pay for this advice.
While the study reconfirmed that SMSFs use financial advice to complement their investment decision-making rather than delegating the full process, the 218,000 SMSFs with unmet advice needs are willing to spend an average of almost $2000 per annum each to meet a range of unmet needs.
This equates to a potential pot of $430 million per annum for planners able to provide advice solutions.
More than a third of SMSF investors who were willing to pay to fill the gaps in advice said that inheritance and estate planning was the biggest unmet area.
In addition, borrowing within the SMSF, buying distressed assets, buying investment property and tax planning were all significant areas of unmet advice needs.
“There are a lot of advice gaps and they do fall into quite clear, distinct groups… there are many ways that advisers can differentiate their offerings to get a bigger piece of the SMSF pie,” said Recep Ill Peker, a senior analyst with Investment Trends.
Winners and losers
However, there are already clear winners and losers in the race to service SMSF trustees. Those advisers thriving in the SMSF space cite their value proposition to SMSF investors, relationships with accountants and ability to do administration in house as the keys to success.
The report, which surveyed more than 400 advisers, reveals that some advisers are racing ahead of the pack in servicing SMSF investors, while others struggle to demonstrate their value.
Increasingly, this is segmenting the industry into three groups: SMSF specialists who service 20 or more clients, SMSF generalists who service fewer than 20 clients and those advisers who feel this market is best avoided.
“Planners in general have been struggling somewhat in the SMSF space over the last few years, unable to meet the growth they have been anticipating for the past few years,” concluded the report.
“However, some planners have been more successful than others. There are now more planners who fall under the SMSF specialist category (25 per cent, up from 23 per cent last year), and these planners derive half (49 per cent) of their practice revenue from SMSFs, up from 44 per cent in 2011.
“In contrast, SMSF generalists have not found their place in this booming market yet, with their revenue from SMSF clients remaining steady at 19 per cent over the same period.”
Accounting firms take the lead
Advisers who find it easy to attract and retain SMSF clients are 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.
When asked about the single biggest challenge to servicing the SMSF sector, specialists cite falls in concessional contribution caps and keeping fees competitive as their greatest hurdles.
Meanwhile, SMSF generalists’ challenges relate to relationships with accounting firms and finding clients.
“It’s clear from this report that there continues to be a large and growing opportunity for advisers servicing the SMSF space. Those advisers that are specialising their businesses, demonstrating clear value propositions for clients and working well with accountants and other SMSF influencers seem to be the clear contenders in this sector,” said Michael Lovett, head of adviser distribution at Vanguard.
“There is a strong message for advisers who want to excel in this sector to safeguard their practices and add immense value to investors by spending more of their time looking at areas of unmet advice to their clients.
“Our studies show that for advisers, creating this point of difference in their practice value propositions can ensure they present a more enduring model, particularly in this new fee-for-service world, which the Future of Financial Advice reforms have introduced.”
