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Best interests aside accountants look to increased SMSF revenue

By Mike Taylor28 June 2022

Self-managed superannuation fund (SMSF) establishments are back on the rise and 72% of accountants and 65% of financial advisers have been a part of that dynamic.

What is more, accountants derived more than a quarter of their revenue from SMSF clients, albeit that SMSF advisers reported a slight decrease in in the share of revenue contributed by SMSFs.

However, while there are concerns about being able to substantiate client best interest, accountants see SMSFs as a continuing growth driver.

After reaching decade lows, new research has revealed that SMSF assets increased by 15% to $877 billion in December, last year, returning them to a three-year high.

The 2022 SMSF Adviser and Accountant Report released today reported that after stabilising at decade lows, SMSF assets increased by 15% to $877bn in December 2021 marking a three-year high since end of 2020. T

It noted that its 2022 report saw a greater proportion of advisers (65%, up from 54% in 2021) and accountants (72%, up from 68% in 2021) reported assisting with SMSF establishment in the past year.

:Accordingly, accountants derived over a quarter of their revenue from SMSF clients with 38% of accountants citing accelerating technology adoption in their practice as a differentiator in the past 12 months,” the Investment Trends report said.

Commenting on the report findings, Investment Trends Research Director, Dougal Guild said accountants remained the main port-of-call for new trustees according to our latest research report.

“The positive business outlook is consistently shared by most accountants, with nearly half expecting SMSF revenue to increase in the next three years. Interestingly, both SMSF advisers and accountants are looking to strengthen relationships with each other this year to enhance their client value proposition for prospective clients.”

The study further revealed that SMSF advisers had seen a slight decrease in the share of revenue contributed by SMSFs this year (24% down from 27% in 2021). Administration and compliance followed by client suitability remained the biggest hurdles in servicing the SMSF market (75% and 42% respectively). Client education is a mounting concern and advisers are calling for more educational content to assist them and their clients to overcome these challenges.

“The ability to comprehensively demonstrate a SMSF is in the client’s best interest is a key pain point that advisers felt are holding them back from setting up more SMSFs. Advisers want to feel better equipped to educate current and prospective clients and are calling for content that can help their clients evaluate their own suitability,” Guild said.

In terms of emerging trends, the research revealed that advisers remained positive and welcomed the upcoming regulatory changes, expecting a net positive impact on business value and revenue. A range of new regulatory measures affecting SMSF trustees have recently come into force, with more to follow from July 2022. Changes include a reduction to the downsizer contributions age limit, work test exemption, and legacy pension amnesty.

“It’s encouraging to see SMSF advisers are positive about the outlook of business outcomes, despite the impending regulatory changes. What’s more interesting to consider is that advisers believe the new measures will alleviate a lot of the operational challenges they currently face – potentially strengthening the appeal of SMSF establishment for clients.”, Guild said.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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1 month ago

Hang on a minute. Surely Best Interests Duty is not a regulatory hurdle to be overcome in recommending more SMSFs. It is a consumer protection mechanism which should stop the inappropriate recommendation of SMSFs. And the vast majority of SMSF recommendations are inappropriate. There are very few situations where a client couldn’t achieve a better outcome with lower cost and lower compliance risk via a public offer fund.

SMSFs have proliferated because accountants have not been subject to any form of enforced best interests duty or conflicts restriction. But licensed advisers are subject to rigid enforcement in those areas. Advisers are playing with fire by recommending new SMSFs or endorsing existing ones.

1 month ago
Reply to  Anon

Accountants know they should act in the clients best interest but since they are acting in an unlicensed manner they also ignore it and simply set up the SMSF and charge the fee to the client. In other words the fee is more important than the client and ASIC do nothing about it. Nothing to see here, just like industry funds who amazingly recommend their own product all of the time.

John Ross
1 month ago

SMSF are really only useful for direct property
The rest of the time they are waste of time and effort
Very few investors understand how to manage investment risk
Over time 90% of them will be better in an industry or retail fund

1 month ago
Reply to  John Ross

An SMSF may be useful for direct property investment using super. But should consumers actually be doing that with their super? Most people have more than half of their net assets in property already via their home. Many have additional investment properties outside super as well. Using an SMSF to invest in property usually results in a heightened asset class concentration, with the heightened risks that entails. It is not a prudent strategy. If the SMSF borrows to purchase the property, the lender will also require personal guarantees from the member, which ultimately puts their home at risk as well. The situation with business owners using super to acquire their business premises is even worse. If the business gets into difficulty it is likely the owner’s income and the SMSF income will be simultaneously negatively impacted. If the SMSF property has a loan on it then the owner will potentially also become liable for the personal guarantee at the worst possible time. Goodbye home.

Using SMSFs to do things that can be done more simply and cost effectively with public offer funds is bad advice. Using SMSFs to invest in direct property is often very bad advice.