SMSFs with unmet needs surges, licensing gap festers

The 2017 Vanguard and Investment Trends SMSF Report found that a record high 277,000 SMSFs reported having unmet advice needs across three clusters of tax and super, retirement strategies, and investment advice. This is from a total pool of 585,000 SMSFs

Investment Trends research director Recep III Peker said that with the super reforms in place, trustees were looking for an adviser that could comprehensively address their various needs.

“Whenever the government plays with the super it creates an appetite for financial advice because people want to understand how it affects them and what can they do as a result,” said Mr Peker.

“Trustees are after someone who is able to help them across all their needs, they want an adviser who is an expert in handling SMSFs, someone they can trust, and who is able to address all of their needs.”

While trustees equally saw accountants and financial planners as trusted sources for their unmet advice needs, there was a gap in the service proposition of accountants that have seen trustees shy away from using one, Investment Trends found.

Out of the total pool of SMSFs, close to half chose not to use an accountant directly, while 214,000 only used an accountant for tax advice.

Interestingly, 60 per cent of those SMSFs using an accountant for tax purposes said they would use them for investment advice if they offered it.

Mr Peker said this reflected the gap caused by the introduction of AFSL requirements.

“If [an accountant’s] proposition is just around establishment and admin, someone else can do it cheaper so the opportunity is to expand your proposition,” he added.

“If my accountant started providing investment advice, [like the] 60 per cent said, [I] would get investment advice from them because I've known them for a long time and I trust them and I know they'll look after me.”

However, the report highlighted how most accountants were not planning to obtain a license, with a growing proportion turning to build a relationship with a financial planning firm instead.

Up to 56 per cent of accountants said they employed someone in-house who could provide financial planning advice, and 19 per cent referred clients to financial planning firms, and 11 per cent received two-way referrals with financial planning firms.

Vanguard market strategy and communications principal Robin Bowerman, said the rise in this multidisciplinary practice was down to risk management by accounting firms.

“You hear a lot of accountants saying well we looked at it from a business point of view, we even talked to certain dealer groups and what they realised was, it's not easy to add the skills or a good financial planning business to an accounting practice and they actually realised that they don't know a lot about investing per se,” said Mr Bowerman.

“At that point it becomes a risk because if you think about an accounting practice they've got a lot of small businesses and they are doing the audit, the tax work for individuals, and the last thing they want to do is move into a financial planning business which could damage their relationship with the companies that they are servicing as their main clients.”