Speaking to SMSF Adviser, Clever Super’s chief executive, Chris Appleyard, previously said the entry of larger institutions into the SMSF administration market has brought with it the conflicts seen to arise from vertical integration in the financial planning and investment platform markets.
“SMSF admin providers have the ability to simply say ‘we cannot support that fund, or that product’,” Mr Appleyard said.
“Similar to a master trust or wrap, if the product is not available on the platform then it‘s simply not possible. [This] is worrying because anyone who chooses to have an SMSF is doing it to have more control over the products it can use.”
However, AMP’s outgoing managing director of SMSF administration Andrew Hamilton told SMSF Adviser AMP’s entry into the space is a reflection of the company’s respect for SMSFs being the fastest-growing sector in superannuation.
He also rejected suggestions that administration tools, such as those provided by AMP, play a restrictive role.
“For people to say that groups like AMP getting involved in this space will restrict products to in-house is simply untrue; trustees always have choice in an SMSF,” he said.
“By definition, an SMSF has total control of what they want to do. If a client wants to access any investment that they are allowed to have within their fund, a good administration system needs to be able to provide that service.
“An SMSF is a legal entity in its own right and a trustee can change their administrator at any time.”
However, Mr Hamilton also explained that providing trustees with access to “absolutely everything” on offer in the way of investment products and solutions would necessarily incur additional costs.
“The time and costs and complexity will impact on the administration cost,” he said. “If clients want to restrict what is available to them or are willing to forgo some flexibility they may be able to pay less.”
Commenting on the issue, Praemium commercial director Andrew Varlamos concurred with Mr Hamilton that from a technological service provision point of view, flexibility and choice is inherently more expensive.
“There is a real cost in administration and connectivity – it’s not just about building in an inherent favouritism – technologically it is just easier to deal with in-house product,” Mr Varlamos said.
I completely agree with Hurricane in his comments. Note that Banks and Institutions are notorious for starting by saying they will never interfere with “your choice” but sooner or later they try to control the market because they cannot resist the potential financial benefits of a monopoly or oligopoly situation, then bleat because the consumer does not appreciate their sacrifices and they move their business elsewhere. I wouldn’t trust them in the slightest regardless of there assertions.
I am a financial adviser formerly licensed under Financial Wisdom, then we shifted dealer group to Charter (owned by AMP). I now work for a self licensed firm.
In my own opinion, there is no denying that dealer groups have marginalised the true integrity of the SMSF capacity as an investment vehicle, by limiting the offerings to favour dealer-group based product via a restricted platform.
I’m just wondering why people are so surprised? We knew that SMSFs have been eroding the market share of product providers. The big players will always find ways to get their piece of the pie.
Dont believe me? Go see an ‘independent adviser’ licensed through a bank-owned dealer group and see if there’s an affiliation. Don’t just take my opinion, you can be relatively scientific about this if you want the truth.