DIY options a flop for APRA funds, bosses admit
Direct investment options for members of APRA-regulated funds are ineffective in reducing fund flows to SMSFs, according to the chief executives of three super funds.
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.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.