New research on self managed super funds (SMSFs) has identified areas of opportunity for financial advisers, particularly around SMSF trustees’ ongoing perceptions of advice deficiencies. While the report showed negative perceptions of advisers persist, SMSF specialists who can win trustees’ confidence may find opportunities to fill the gaps in SMSF advice needs.
More than 60 per cent of SMSFs still do not receive advice, an increase over the past 12 months that continues an eight-year trend, according to April 2015 research conducted by Investment Trends and sponsored by Vanguard. The research covered around 3500 self managed SMSF trustees and 500 SMSF advisers. In the context of the survey, a “financial adviser” is either an RG146-qualified financial planner or an accountant.
A lack of confidence in financial advisers’ expertise is a key reason why many SMSF trustees fail to engage the services of a professional planner, the research found.
“[SMSF trustees] have a lot of unmet advice needs, it’s just that financial planners really have to work hard at articulating their value-add, otherwise they’re not going to as readily get the SMSF relationships they have been [getting] in previous years,” says Recep Peker, head of research, wealth management, Investment Trends.
Peker emphasised that the threats also represent a potential opportunity for financial planners. Out of the total survey sample of SMSF trustees, some 210,000 trustees SMSF trustees identified a number of areas where they wanted advice. Inheritance and estate planning (identified by 59,000 trustees), SMSF pension strategies (55,000) and age pension (51,000) were the top three areas – along with investment related advice areas including greater international diversification and stock picking.
Poll: Are opportunities to advise SMSF trustees increasing, decreasing or unchanged?
“There’s a lot of SMSFs out there that want to do things themselves,” Peker says.
“And the reason [for this] is they think if they talk to a financial planner, it’s going to cost them an arm and a leg and also maybe their first-born child…that’s definitely a perception financial planners can help combat, maybe price their services in a more modular manner, or demonstrate their ongoing value better.”
Capitalise on trust
Peker also suggests financial planners can capitalise on the higher trust consumers have in accountants by creating referral partnerships, thereby picking up more SMSF-specific advice work.
He says the research also identified a decline in the rate of SMSF borrowing, which could be linked to a decline in the purchase of property inside SMSFs.
The use of SMSFs to fund the purchase of properties is being closely watched by the Australian Securities and Investments Commission (ASIC), in its efforts to eliminate property spruikers from the advice sector.
Another disturbing finding for planners showed fewer SMSF trustees intended to approach financial planners to address advice needs, with this rate declining from 70 per cent last year to 54 per cent in 2015. The rate of respondents who intended to speak to an accountant about their SMSF strategy remained steady at 50 per cent.
“This may also be partly due to more awareness about the changes that have come through with FoFA and so on,” Peker says.
“You’ll find there’s always a group out there who don’t trust financial planners. Over the last year, planners have had some bad press. That’s just reinforced the views of advice sceptics in general, so the group of people who didn’t trust financial planners to begin with, they’re still saying they don’t trust financial planners. But the proportion hasn’t increased too much.”
