The opportunities for self-managed super fund (SMSF) specialists have never been greater. That’s the only conclusion that can be drawn from the latest research by SPAA and Russell Investments. The fourth annual Intimate with Self-Managed Superannuation report shows that despite a softening in net SMSF establishments in 2013, the sector continues to enjoy solid growth, whether the yardstick is the number of funds, the number of trustees or the level of funds under management.
It’s not just the sector’s growth that is evidence of the appeal of SMSFs – an appeal that is now spreading to Generation X and Y. As the report says, it’s also demonstrated by the “increased focus” that the APRA-regulated funds have placed on stemming the outflow of members to SMSFs and “efforts to identify and retain those members most at risk of leaving”. What’s that old saying, “imitation is the sincerest form of flattery”?
Younger people
SPAA has no doubt that this growth will continue, especially as younger people are attracted to the concept of managing their own retirement savings. Although that growth is exciting for our sector, what’s far more important, from our perspective, is ensuring that the advisers servicing the more than one million trustees have the skill set to fulfil their professional obligations.
That there will be growing demand for their services is beyond question. As the report highlights, trustees fall into three categories: controllers (those who manage their own funds); coach seekers (those who seek information and mentoring to support their decisions); and outsourcers (those who want a larger number of professionals to manage their fund). Significantly, only 10 per cent are controllers, with coach seekers and outsourcers splitting the difference at 45 per cent each.
Important area of growth
As the report succinctly phrases it, “the need for specialist SMSF advice is an important area of growth. Focus group research continues (as observed in 2013 and 2012) to demonstrate that trustees (both controllers and even outsourcers) seek and value multiple information sources – as well as sources of advice – all with the objective of helping them make informed decisions.
“Looking at SMSF advice, we continue to see a trend by trustees to seek advice from specialists in those areas where they require most assistance, with three-quarters of trustees saying they would be willing to pay a professional for specialist services.”
It is because of the evidence rolled out in this and other research – graphically showing how important the role of the SMSF specialist will be as the sector grows – that SPAA has taken a firm stance in opposing the government’s proposed amendments to exempt general advice from the ban on conflicted remuneration.
No room for conflicted remuneration
As SPAA said in its submission to Treasury on the FoFA amendments, we strongly believe that there is no room for conflicted remuneration in financial services, even where the financial advice being provided does not specifically take into account the consumer’s personal circumstances.
Quite simply, SPAA believes that remuneration models based on commissions or volume payments are contradictory to a financial adviser (whether they are providing personal or general advice) providing the best advice for the client, and that the best consumer outcomes are achieved independently of any links with product remuneration.
This can only be achieved in an environment where remuneration is aligned with providing high-quality advice and on a fee-for-service basis, not on a commission or volume basis that incentivises advisers to sell products, rather than provide objective, quality advice that is in the genuine interest of the client. Increased access to general advice does not equate to consumers receiving financial advice that is appropriate, adequate or that will assist them in making improved financial decisions.
Increased engagement
It’s our strongly held contention, which is borne out by our research, that personal advice tailored to consumers’ personal circumstances results in them having increased engagement with their financial future and retirement savings. This also aligns with increased consumer satisfaction, knowledge and confidence.
Additionally, our research shows that consumers are increasingly demanding specialised financial advice to assist them in achieving their financial goals. The research shows a direct correlation between the standard of specialist competent advice and the level of performance, satisfaction and trust. We have been advocating for a greater level of clarity regarding what is “advice” versus “sales and information”. We believe that by getting the basics right, the best interests of consumers will be achieved.
One caveat
As I said, there are no signs that SMSFs are losing their appeal. Indeed, a strong argument could be mounted that the greater the market volatility, and the more that investment returns fluctuate, the more people want to control their own retirement destiny. It’s an ambition SPAA endorses – with one caveat.
Those who opt for an SMSF must have access to the highest quality professional advice that aligns the service with the fee – not the product.
