Darren Stevens, our Global Head of Product for Wealth Management recently chaired a round table that discussed driving change through innovation in Self Managed Super Fund (SMSF) offerings. It was a fascinating discussion that saw some leading thinkers from the SMSF sector weighing in.
A number of themes were touched upon and debated through the course of the discussion. Firstly, there was a consensus that the SMSF sector is a very important and growing part ($400 billion-plus market, with $14 billion each year moving out of existing funds into SMSF) of the Australian superannuation system and that it will continue to grow.
A participant in the round table – Andrew Bloore of Super IQ – put forward a view that I agree with, he doesn’t see self-managed super funds as a different sector. Rather he sees it as a different time in life. We know that the average balance of SMSFs is about $1 million. We know that the average opening balance of a SMSF is $240,000. Entry into SMSFs happen when the investor forms an emotional attachment with their investment. Whilst they want the ability to buy and sell investments, they really want the ability to be involved in decision making.
In the coming years there will be a generational change, which may see an increasing number of funds with lower average balances replacing the higher balances that move into drawdown phase. That generational shift will also affect behaviours, including the way that consumers will interact with various providers, and will change the way administrators interact with their clients.
As relationships evolve and advances in technology and administration are made, advisers won’t be called on to answer “how much is in my account” style questions (this information is increasingly available in real-time online), rather the expectation will be for strategic advice.
There is a general move toward wrap platforms and SMSF services converging in terms of what they provide – as they focus on retention strategies around High Net Worth Individuals on those platforms. Advisors that choose not to provide SMSF service and advice may find it challenging to grow their client base.
With the SMSF sector now being the largest and most fragmented market, consolidation among service providers appears inevitable. Indeed, some large institutions have already started making acquisitions and more are sure to follow. However, the fact that most Australians choose to manage their SMSF in consultation with their personal accountant suggests that the drive towards consolidation may have a limited effect.
With the rise in fee pressure and technology advancements, I think we will see players in this market become more specialised. The roles of accountants, advisors, and the interaction between them will shift. Regulatory changes affecting accountants and FOFA changes for advisers will see more partnerships arise.
Across the board we will see increased levels of self-service from an administrative task perspective and a higher level of value added service around advice. And all of this at a lower cost.
For a copy of the round table write up click here.
How do you see SMSFs fitting into the future of the superannuation landscape? How will it evolve?