Speaking at a lunch hosted by the Australian Institute of Superannuation Trustees, Ness Super chief executive Angie Mastrippolito said she does not see direct investment options as a solution to stemming leakage to SMSFs.
“We think there are other issues which guide people towards SMSFs and I think it’s the accountants and property deals you can do,” said Ms Mastrippolito.
Instead, Ness Super’s strategy for dealing with leakage is to develop closer relationships with members.
“We see that as the way, in a sense, to circumvent the advice that they’re getting from the accountant,” she said.
Local Government Super chief executive Peter Lambert said while his fund has adopted a direct investment option he is doubtful it will have a significant impact.
“We don’t have a huge number of people who have taken it on board,” he said. “It is something we can at least put in our arsenal; we can say if you’re considering an SMSF you can have a look at what we have to offer.”
Sunsuper chief executive Scott Hartley said it has never been a high priority for his fund and while there is some member demand for term deposits, there is not for direct share trading.
“People don’t open an SMSF because they necessarily want to trade – some do, but it’s a very small percentage. Most end up doing it because their accountant or adviser tells them to do so, and that’s the behaviour we need to get to,” he said.
The panel was also asked if there was an opportunity for APRA-regulated funds to bring SMSFs in under their fund and manage the administration of these SMSFs within a pooled arrangement.
Mr Hartley said he would be very reluctant to do so.
“I have seen the SMSF administration operations in my past life,” he said. “They are very, very costly and very difficult. I’m sure there is some great digital solution out there to make it more efficient, but it’d take a huge amount of resources.”
Mr Lambert said he would also be unlikely to take his fund in this direction.
“You don’t know what you’re going to inherit: [SMSFs] which haven’t logged tax returns for the last three or four years, non-combined investments – all sorts of skeletons that were left to unravel,” he said.
“We’ve got a reasonably well defined market that we’re happy to operate in. I don’t see us changing what’s on our agenda.”
People commence SMSFs for different reasons. In my experience clients have created them for:
1 The lower costs
2 The flexibility of investment
3 The ability to buy property and borrow
4 The transparency of the investments
5 Tax planning flexibility
6 Estate planning is easier
7 Advice from a qualified professional is a phone call away
8 Centrelink can be more easily addressed
The costs of an SMSF really are much lower if the professional accountant or financial planner do their jobs.
The other stake holders have their benefits and many will want to remain in managed funds, Industry funds etc.
Please consider a small APRA fund (SAF) as the “best of both options”. The SAF has the flexibility of SMSF whilst conducted under the auspices of APRA regulation. The fund member is the winner!
Accounting for tax benefits at the member level would be a good start. Members who decide to adopt a long term growth approach, say in Aussie shares, getting the full value of their franking credits instead of having them diluted across the full membership.
Also having decent insurance so that you can get paid in the event of a TPD claim would be good. Anyone holding TPD in most industry funds are doing themselves a huge disservice. Paying premiums just for the fun of it.