JWW Consulting founder John Wiseman says the limited licensing regime has increased the costs and fees associated with running an SMSF for many trustees. As a result, there may be a migration back to the industry and retail super funds.
While some SMSF trustees choose to set SMSFs up for the purposes of having greater flexibility and control over finances, there is a group of trustees for whom fees and costs are very important, Mr Wiseman said.
This is particularly the case for SMSF trustees who had previously never paid for financial advice.
“These are the trustees that are in for a real shock,” Mr Wiseman said.
He said the take-up of financial advice by accountants is a lot lower than expected, with SMSF clients now having to be referred to financial advisers for advice they previously received at a cheaper cost from their accountant.
“Accountants can no longer talk to clients about setting up an SMSF and do it cheaply. They’ve got to send the client somewhere else where it might cost the client $2,000 or $3,000 to obtain a trust deed,” Mr Wiseman said.
At the same time, there’s been a drop in financial advisers servicing this area and many of them have been forced to increase their fee structures due to litigation risks and the cost of compliance.
“Their PI insurance [costs] is increasing and the level of compliance and regulation is getting out of control,” Mr Wiseman said.
“[Financial advisers] are going to be looking at their services and thinking, ‘What am I going to make out of this and what is the potential for litigation?’.”
The reduction in the concessional caps could also have an impact on the number of SMSFs because it may restrict the types of assets they can invest in.
“Are you going to put $25,000 into super per year to buy a property? You’ll be putting $25,000 in for the next 30 years before you can afford to do that with the current caps,” Mr Wiseman said.
“It’s not going to be easy [to have an SMSF] and it’s going to cost more, and whoever they go to see will show them a comparison of prices.
“I think SMSFs are here to stay but the numbers will be dropping off a bit.”
Mr Wiseman said there may only be a tail end drop off this year, but when trustees receive an expensive bill for the second time next year, there will be a more substantial decline.
“This year, you’ll see the obvious SMSFs go to industry funds or retail funds, [smaller balance] SMSFs, but the bigger ones might take a little bit longer.”
the 4 important things that this chap seems to be overlooking are:
1) unlicensed accountants can continue to make use of the existing exemptions for tax and super advice etc (see ASIC guidance note 216)
2) some unlicensed accountants are now referring trustees to the quick and inexpensive specialist digital financial advisers to minimise any delay and extra cost involved with transaction execution
3) in any event, unlicensed accountants DON’T HAVE TO REFER clients to AFSL licensees – they just can’t give the advice themselves and
4) trustees are free to IGNORE ANY REFERRAL and ‘take their own advice’.
The commentator might wish to credit trustees and their accountants with a bit more nouse.
Removal of the accountants’ exemption simply closes an obvious loophole in the advice/adviser licensing framework. It was never intended to drive SMSFs into the arms of financial planners, just like it won’t have the unintended consequence of slowing SMSF growth.
Finally, let’s not forget that self-directed, better-educated SMSF trustees are the polar opposite of the ‘preferred’ financial planning client. They don’t really want full financial advice and a hefty SOA for $2-3000+. Some might be open to obtaining highly specific piece of scaled financial advice, delivered on-line for a much cheaper price.
Those who aren’t open to receiving third party financial advice were probably never going to be, anyway, and will just do the leg work themselves.
After all, aren’t they “self-managed” by definition?!
1) unlicensed accountants can continue to make use of the existing exemptions for tax and super advice etc (see ASIC guidance note 216)
2) some unlicensed accountants are now referring trustees to the quick and inexpensive specialist digital financial advisers to minimise any delay and extra cost involved with transaction execution
3) in any event, unlicensed accountants DON’T HAVE TO REFER clients to AFSL licensees – they just can’t give the advice themselves and
4) trustees are free to IGNORE ANY REFERRAL and ‘take their own advice’.
The commentator might wish to credit trustees and their accountants with a bit more nouse.
Removal of the accountants’ exemption simply closes an obvious loophole in the advice/adviser licensing framework. It was never intended to drive SMSFs into the arms of financial planners, just like it won’t have the unintended consequence of slowing SMSF growth.
Finally, let’s not forget that self-directed, better-educated SMSF trustees are the polar opposite of the ‘preferred’ financial planning client. They don’t really want full financial advice and a hefty SOA for $2-3000+. Some might be open to obtaining highly specific piece of scaled financial advice, delivered on-line for a much cheaper price.
Those who aren’t open to receiving third party financial advice were probably never going to be, anyway, and will just do the leg work themselves.
After all, aren’t they “self-managed” by definition?!