Finding New Niches

SMSFs

Graeme ColleyDirector of Education and Professional Standards

1. About SPAA2. How SMSFs are currently distributed?3. Why are the main reasons why people set up SMSFs?4. What are they mainly invested in? 5. What changes are happening?6. Players in the industry7. Impact of reforms / Current developments in SMSFs8. New entrants – likely success or otherwise e.g. AMP etc.9. Costs and Performance of SMSFs.10. Future of Super / SMSFs.11. Demographics

• Peak association representing SMSF Advisors in Australia

• Voice and advocate of SMSF sector

• Creator of new profession

• Best practice standards in SMSF advice & education

• Self-regulatory industry body & Code of Conduct

• Network for all advisors – licensed and not licensed

• Services for members – including PI insurance

• Upholding the integrity of the SMSF Industry

• Thought leader

SPAA’s Role

Changes in the Superannuation Industry

114

48

18

19

2002

32

2127

4 16

2013

SMSF

Industry

Retail

Corporate

Public Sector

APRA stats published January 2013

Superannuation SectorAs at 30 June 2012

Fund Type Entities Assets($ billion)

Number of member accounts ('000)

Average account balance ('$000)

APRA regulated

Public offer super funds 173 22,410 644.8 28.8

Non-public offer super funds 141 2,853 181.5 63.6

Approved deposit funds 77 7 0.1 As

Eligible rollover funds 16 4,747 5.4 1.1

Small APRA funds 3,201 4 1.8 448.3

ATO regulated

Self-managed super funds 478,263 914 439.0 480.5

Other

Exempt schemes b 19 976 85.7 87.8

Balance of life office statutory funds42.2

Total a 481,890 31,911 1,401

‘…the SMSF sector is well managed and well functioning…

…what is important is what was not recommended!

Cooper Review30 June 2010

• 509,362 SMSFs and nearly 1 million SMSF members

• Average balance over $1 million per fund 

(median balance $600k)

• Average balance $514k per member

• 35,776 SMSFs were established, while 2,230 were closed in 2012/13

• Total SMSF assets $495b at June 2013

• 10,039 net new entrants in June 2013 quarter

• Lower fees in many cases – 0.60% (38% < 0.25%)Source: ATO

SMSF Facts – 30 June 2013

• can implement more diverse asset allocations than APRA-regulated funds

• hold the majority of pension assets (80%+)

• can be extremely tax efficient

• can negotiate best prices on professional services independently.

• fewer members - can align their best interests at a lower cost

+ returns

• have long-term investment goals & are ‘sticky investors’

SMSFs excel because…

“the only sector to meet Australian Government objectives”

• adequacy• longevity• sustainability• member choice and engagement• GFC survival• positive performance – equal to or better than other

funds• lower fees – 0.39% pm and 0.60% pf (38% <0.25%)• focused on returns – well placed for future volatility.

Cooper Review Report December 2009

What SMSFs do right

Distribution of SMSFs

‐6,000

‐4,000

‐2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Jun‐08

Aug‐08

Oct‐08

Dec‐08

Feb‐09

Apr‐09

Jun‐09

Aug‐09

Oct‐09

Dec‐09

Feb‐10

Apr‐10

Jun‐10

Aug‐10

Oct‐10

Dec‐10

Feb‐11

Apr‐11

Jun‐11

Aug‐11

Oct‐11

Dec‐11

Feb‐12

Axis Title

Net Establishments of SMSFs

Establishments

Windups

Net establishments

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

ACT NSW NT QLD SA TAS VIC WA

Distribution of funds State by State

Age of SMSF members

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

< 25 25 ‐ 34 35 ‐ 44 45 ‐ 54 55 ‐ 64 > 64

Male

Female

Total

How much do SMSF members earn?

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

$0 ‐ $20,000 >$20,000 ‐$40,000

>$40,000 ‐$60,000

>$60,000 ‐$80,000

>$80,000 ‐$100,000

>$100,000 ‐$200,000

>$200,000 ‐$500,000

>$500,000 Unknown

Earnings of fund members by gender (%)

Male

Female

Total

Why are SMSFs established?

• Control

• Flexibility

• Cost

• Tax planning

• Estate planning

What changes are happening to SMSFs

StrongerSuper changes• Accountants limited licence• Auditor registration

Technical changes:• Off market restrictions• Valuation guidelines• Artworks and collectables• Limited recourse borrowing• Penalties• Proof of identity checks

Who are the players in the SMSF industry?

Main players:• Accountants• Financial planners• Trustees and members

Secondary players:• Associations• Product providers – stockbrokers, share trading services,

real estate agents, banks and financial organisations• Administrators

Those who think SMSFs should be extinct

‘…if all Australians were to genuinely benefit from superannuation, then in 25 years time when the

market had matured, everyone would have an SMSF as only an SMSF can actually meet each individual’s

needs for their retirement!’Jeremy Cooper

SPAA NC2010, 18 Feb 2010

Future of SMSFs

• Sector poised for growth ‐ coming from a new segment‐ Middle Australians

• Traditional ‘advice’ model redundant‐ Reposition to financial mentor

• Contribution caps are stifling growth‐ In retirement income & in National savings  ( $74k or $15bn less pa)

• Providers need to break the ‘product’ mindset‐ ETFs; a low cost implementation solution

• Trustees have a right to quality information and services‐ Genuine desire to be responsible decision makers‐ Genuine requirement for competent specialist SMSF advice

Lessons learned from the research…

‘…Retail Funds bag Industry Funds,Corporate Funds bag Industry Funds,

Industry Funds bag Retail Funds,Everyone bags SMSFs

and SMSFs don’t really bag anyone…they just get on with business!...’

The Hon. Bill Shorten, MPAFA Luncheon, 27 June 2011