Major report identifies ‘sizable shift’ in SMSF sector

The Future of SMSF survey, a joint research study by The SMSF Academy and BGL Corporate Solutions, had 430 participants, comprising mostly of accountants followed by financial planners, administrators and auditors.

The survey found keeping up with legislative change is a key challenge for SMSF professionals, as is remaining competitive in pricing and fee recovery.

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In an open letter to the SMSF profession, Mr Dunn said he expects to see fee pressure continue to increase.

“Over the coming years, I expect to see fee pressures rise and trustees questioning the value of what they get from this annual compliance approach,” Mr Dunn said.

“Many trustees (and their advisers) are already demanding more – how to manage key risks within the fund, including contribution caps, pension limits, their fund investment strategy and more.”

On average, the fee charged for SMSF compliance and administration services is $2,371, with a median of $2,250, the research found.

Over the past couple of years, there hasn’t been any significant change in the average fees charged to an SMSF client, with the average fee increasing by 3.5 per cent and a median of 2.5 per cent.

The SMSF sector is evolving to be a popular “hunting ground” for future revenue growth, the research noted, with 41.8 per cent of respondents expecting growth of up to 25 per cent.

For approximately a third of respondents, the SMSF sector will be aggressively targeted for revenue growth with growth levels expected to exceed 50 per cent.

“This heightened level of activity to grow SMSF revenues is likely to create a level of fee pressure amongst professionals. As a result, many businesses will need to reconsider their value proposition, how they drive efficiencies within their practice and the tools to better engage with SMSF trustees,” the report stated.

The research found it is apparent that individuals and businesses that have a specialist focus have a “far greater proportion” of fee revenue related to SMSF activities.

The average level of fees generated by SMSF activities across all respondents is approximately 31.4 per cent, while those who operate a specialist SMSF business or practice with a SMSF specialist division have fee revenue with SMSF clients nearly 20 per cent higher at 50.4 per cent.

In his open letter, Mr Dunn said there will be a continuing importance placed on SMSF specialisation, however he noted it is not the “panacea for SMSF success”.

“A disproportionate number of professionals remain unconvinced of the need for SMSF specialisation and its importance to be successful in this space. It presents a real challenge for the professional bodies to better articulate the benefits to its members to become a SMSF specialist,” he said.

Broadly speaking, Mr Dunn said the SMSF sector is currently experiencing a “sizeable shift” which will require practitioners to change and adapt in order to embrace business opportunities.

“In a sector acknowledged as being disruptive to the broader superannuation industry, the SMSF sector itself won’t be immune from its own disruption,” Mr Dunn said.

“I believe these winds of change are upon us. You only need to reflect on the pace of change within society to realise what is upon us. Reflecting on the changes over the past decade is insignificant to what potentially lies ahead.”