The Self Managed Super Fund (SMSF) sector is often referred to as a “cottage industry” because it is administered almost entirely by a heavily fragmented network of suburban accountants. But with projections suggesting that the SMSF sector is set to hit $2.2 trillion within 20 years, the question arises of whether or not the SMSF investor of the future will be willing to submit to the limitations of a cottage industry.
To this point, SMSF trustees have had relatively modest expectations when it comes to fund reporting. Receiving printed financial statements once a year is about all the average member can currently expect. But how much longer will SMSF members accept a lower standard of reporting than that which is available to retail or industry super fund members?
SMSF members are among the most engaged investors in the country. Surely it can’t be the case that they simply don’t care enough to want access to detailed and timely information. It seems far more likely that these people are simply being forced to accept the limitations of the current status quo.
With the right systems in place, there is no logical reason why SMSF investors can’t have access to detailed performance attribution and up-to-date member balance and fund tax positions. The lack of access to this information is severely limiting many trustees’ ability to properly take advantage of certain retirement planning strategies, not to mention preventing them from properly comparing their fund’s performance with the broader industry.
Retail and industry super funds are working to compete in this market, striving to appeal to members who wish to more closely direct their investments by offering products and features geared to deliver greater control. And the Future of Financial Advice (FOFA) reforms and MySuper are set to drive non-SMSF product prices down across the industry, making the superannuation market far more competitive.
As SMSF administrators seek to differentiate their services in a highly competitive market they will need to be able to meet the expectations of increasingly sophisticated trustees. Self-directed investors need access to tools that help them model the impact that different investment strategies will have on their portfolio. A true “do it yourself” investor needs to be able to constantly monitor their projected retirement income and calculate the impact that different market returns will have on their future lifestyle expectations.
The $2.2 trillion SMSF sector of 2033 will be a very different one to the cottage industry we see today. The SMSF administrator of the future will need to lead through innovation if the sector is to maintain its place as the most attractive place for Australians to invest their retirement savings.