The use of Australia’s unique self-managed super fund structure continues to grow in both raw numbers and as a proportion of total superannuation. Despite this, in its current adviser survey, Adviser Ratings found that about 65 per cent of SMSFs still remain unadvised. This fact, combined with regulatory changes, provides an opportunity for financial advisers to capitalise on the popularity of SMSFs with the Australian public.
The untapped market
The proportion of super held in SMSFs has tripled in the last two decades, Australian Taxation Office (ATO) data shows. SMSFs accounted for just 10 per cent of the value of all super in 1998. As at June 2017, just over 30 per cent (about $700 billion) of the $2.3 trillion held in super was in SMSFs, with the average value of an individual fund about $1.1 million.
The number of SMSFs also continues to grow. It has increased by nearly 50 per cent over the last eight years, from just over 400,000 in June 2009 to just under 600,000 in June 2017. In the same period, the total number of super funds in the other four sectors combined has been consolidated from 463 to 214. Over the last five years, there has been an average of almost 6 per cent annual growth in the number of SMSFs and there are now more than 1.1 million Australians engaged with SMSFs.
Opportunity for advisers
Early indications from Adviser Ratings’ Annual Adviser Survey suggest that, on average, 15 per cent of an adviser’s client base has an SMSF, with advisers in NSW at nearly 18 per cent on the high end of the spectrum and those in Western Australia showing roughly 8 per cent on the low end; however, they represent a much higher percentage of the revenue for advisers’ practices.
Mark Hoven, chief executive of wealth at Adviser Ratings, stated: “With accountants now requiring licensing to give advice, the number of advice clients with SMSFs is expected to grow as accountants look to become authorised representatives under either limited AFSLs or more comprehensive AFSLs. Advisers are also now searching for platforms that have strong SMSF capability. There is a massive opportunity for both advisers and technology platforms to win the SMSF race.”
Analysis of ATO and Australian Bureau of Statistics data shows that Victoria has more SMSFs per capita than anywhere else in Australia. Victorians represent nearly a third of all SMSF holders, while making up only one-quarter of Australia’s population.
In the five years to June 2016, there were 36,000 SMSF funds set up annually, while the number of wind-ups was about 8600 a year. With 2.1 members per SMSF, huge growth prospects remain for the SMSF space. The annual survey results show 65 per cent of SMSFs remaining unadvised. This is in line with Investment Trends data from 2016.
Adviser Ratings will make available a national summary report, as well as a special regional summary report on advisers’ local areas, for every adviser who completed the survey, which closed on December 8.
Rodney Lester is consumer and adviser services director, Adviser Ratings. Adviser Ratings is an online platform with more than 23,000 financial advisers who have been independently rated and reviewed by their clients.