It’s been well reported that superannuation is on a growth trajectory. A 2015 Deloitte report predicted funds under management in the Australian superannuation system would increase to $9.5 trillion by 2035, while the latest data from the Australian Prudential Regulation Authority shows total superannuation FUM already standing at $2.3 trillion, as at June 30, 2017.
Like super more broadly, SMSFs will receive a burst of investment in the next 10 years, as people look to take control of how their funds are allocated. But that’s not the only trend that will continue over the coming decade. We’re already seeing SMSF trustees who are increasingly well informed, better educated, and more demanding.
These twin dynamics of industry growth and empowered trustees will dramatically change the nature of the advice industry over the next decade – in two key ways.
Advisory firms that get it right will be fast-growing businesses. More trustees will want specialist advice that will enable them to set their long-term retirement goals, knowing that retirement could well last 20 years or more.
This is an exciting commercial opportunity. At the same time, because these trustees will be more demanding, they will need to know that their adviser is adding value, even as their knowledge and access to information increase.
This is the business challenge. In looking to the future, many reports focus on technology and how it is changing the client-adviser relationship. But that is not the main factor that will determine how the future will change for advisers. Rather, the key factor will be how well advisers ensure their skill set, their industry knowledge and their experience will equip them to serve a more demanding client base. How they meet this challenge will very much involve technology, but that is not the full story.
What does this mean for trustees and advisers? For trustees, we expect more efficient management and better understanding of their SMSF portfolios’ performance and goals. With increasingly higher SMSF balances to work with, members will become even more sophisticated in their knowledge of markets, asset allocation, performance reporting and, increasingly, the ethical aspects of their investments. Environmental, social and governance (ESG) criteria play a big role in the institutional market, and many SMSF trustees can be expected to follow suit. The opening of new asset classes such as infrastructure will create both challenges and opportunities.
Technology innovation will evolve to meet trustee demands. Digital innovations, such as user-friendly reporting or administration apps and robo-advice, will be in demand. Deloitte noted in its report that “even the more affluent consumers (who already have access to financial advice) will start experimenting with this new advisory model and some will shift over a portion of their financial assets”. But I would contend this will never replace their need for personal, strategic advice; instead it will complement it.
As I said earlier, the future business opportunity for advisers is both exciting and challenging. SMSF specialists will need to upgrade their skills continually to meet these challenges. As the latest changes to superannuation demonstrated, governments of all persuasions have an irresistible urge to change the system, and trustees will need to be kept abreast of these changes. How your business responds to this incoming information will determine your success.