A majority of self managed super fund (SMSF) advisers expect revenue from SMSFs to grow by more than 10 per cent over the next three years, according to a new study from Core Data.
Conducted between the end of March and start of May 2014, the SMSF Professionals Study asked 101 questions of an overall sample of 326 respondents. This number comprised 151 financial planners, 103 accountants and 33 other professionals, including auditors and administrators.
Despite the high expectations of business revenue growth from SMSFs, more than 10 per cent of respondents have either moved out of providing SMSF services, or have never offered them.
A major reason for this was a lack of relevant qualifications, as cited by over 39 per cent of respondents.
A big stretch for some
“It is a minority, but for some people, they recognised that the qualifications and resources required are quite considerable in comparison to the average client – I would expect some have decided it’s not part of their core capability,” says Kristen Turnbull, head of financial services, Core Data Consulting.
The reasons cited for not offering SMSF services revolved mainly around a perception of them being too complicated (18 per cent) and a preference for other, more profitable areas (24 per cent).
“Obviously, we’ve seen huge growth in this sector in recent years, so I think that it’s certainly an area that a lot of planners and accountants not currently offering services within are looking at in the future…this is the biggest growth area of super,” Turnbull says.
Administration, regulation disincentives
The study also indicated that simpler regulation and cheaper administration would encourage more advisers to offer SMSF services.
“I think, from an administration perspective…it’s quite resource-intensive to service these clients. A lot of practices are looking at outsourcing as a potential solution to reduce that administration, [to see] if they can do that cost-efficiently,” Turnbull adds.
In terms of regulations, she says this is an external factor that advisers have to learn to live with. “I think that’s really outside of their control…that’s something they just have to work within.”
The report also pointed to SMSF specialisation as a considerable opportunity for advisers, with only just over 40 per cent offering this. Only 27 per cent of financial planning firms have one or more specialist SMSF staff, compared to over half (56 per cent) of accounting practices surveyed.
While the study didn’t look specifically at outsourcing of SMSF services, the prevalence of outsourcing did emerge as part of an earlier Core Data study.
“This looked at advisers’ business models and how they’re changing. Administration and compliance are the biggest challenges, and outsourcing came through quite strongly,” Turnbull says, with this approach adopted by around a third of financial planning practices surveyed.
This showed that two in five SMSF advisers (42.9 per cent) are currently using and outsourcing, with this much more common among financial planners than accountants.
“The most commonly outsourced areas are administration and SMSF establishment, particularly among financial planners, because it’s not their core capability.
“But on the flipside, I think we’re seeing more accountants giving more considerations to move to outsourcing…but I think they’re moving quite slowly on that piece,” Turnbull says.
Comparison with SPAA / Macquarie study
Many of the trends identified in the latest Core Data SMSF report correspond with another recent study conducted by the SMSF Professionals’ Association of Australia (SPAA) and Macquarie Bank.
The Core Data study found that more than 39 per cent of respondents were authorised representatives of an Australian Financial Services Licensee (AFSL). The joint SPAA / Macquarie report found 26 per cent of respondents had their own AFSL.
Both studies identified an expectation of further growth ahead for the SMSF space. Half of those surveyed by SPAA / Macquarie said they felt positive about the SMSF services industry. Similarly, Core Data found that just under three-quarters (73 per cent) of advisers expect revenue from SMSF business to grow by more than 10 per cent over the next three years.
The predominance of client referrals in the generation of new SMSF business was another common finding across the studies. The Core Data research saw more than 75 per cent of advisers identify client referrals as their key source of SMSF clients, compared with 72 per cent within the SPAA / Macquarie study.
