Planners unrealistic about SMSF revenue

There is a mismatch between the amount of revenue financial planners expect to derive from SMSFs and what they actually receive.

The Vanguard/Investment Trends April 2013 SMSF Report surveyed the attitudes of 417 financial planners, and found they tended to overestimate the amount of revenue they would receive from SMSFs in three years’ time.

In the 2010 SMSF Report, respondents said they expected SMSFs to deliver 38 per cent of their practice revenue in 2013, although actual revenue was 22 per cent.

The report asked financial planners if they found it harder or easier to acquire SMSF clients (compared to non-SMSF clients).

Thirty-one per cent of respondents said they found it ‘easier’ or ‘much easier’ to acquire SMSF clients. Of that group, 36 per cent put it down to the fact that their clients see the value of good advice, while 26 per cent said their clients appreciated the extra control associated with an SMSF.

But for financial planners who are struggling to acquire SMSF clients (26 per cent of respondents), the control inherent in SMSFs was a stumbling block.

Planners who said it was harder to acquire SMSF clients complained that SMSF trustees are too self-directed, have a ‘do-it-yourself’ attitude and won’t give away control. They also griped about the competition from accountants.

However, the report also found that working for an accounting firm or having close referral relationships with accountants was vital to being successful with SMSF clients.

For financial planners who find it easier to acquire or retain SMSF clients, 27 per cent work for an accounting firm, 29 per cent refer their clients to accountants, and 19 per cent receive referrals from accountants.

When it comes to financial planners who struggle in the SMSF space, only 10 per cent work for an accounting firm.

Financial planners who are successful in this space are also able to charge more for their services.

On average, planners who find it easier to acquire SMSF clients can charge $3,100 upfront and $4,100 ongoing to SMSFs, whereas planners who struggle charge $2,700 upfront and $3,700 ongoing.

The report also separated financial planners into SMSF ‘generalists’ (between one and 20 clients) and SMSF ‘specialists’ (more than 20 clients).

As of April 2013, 48 per cent of financial planners were SMSF generalists, 25 per cent were SMSF specialists, and 27 per cent did not advise on SMSFs.

The number of SMSF specialists is also up from 23 per cent in May 2012.

On average, SMSF generalists derive 19 per cent of their practice revenue from SMSFs, while for SMSF specialists just under half of their revenue comes from DIY funds.

SMSF specialists invest 42 per cent of their clients’ funds in direct listed investments, as opposed to 33 per cent for SMSF generalists.

SMSF generalists also invest more of their clients’ money in managed funds (9 per cent, as opposed to 7 per cent for specialists).

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