Consolidation of SMSF industry gaining speed
The SMSF industry is showing further signs of consolidation with the number of larger SMSF firms growing and the number of SMSFs being serviced by these firms also increasing, based on data from the Class database.
The latest Class SMSF Benchmark Report for December 2017, based on data from 150,000 SMSFs in the Class Super databse, indicates that while smaller SMSF firms still remain a significant portion of the industry, the number of larger firms is growing.
While the latest report shows that the number of major administrators with over a thousand SMSFs in the 12 months to December 2017 saw a slight dip from 14 to 13, the second and third largest categories both grew in number and now account for a greater proportion of the market.
Large SMSF practices that have between 251 and 500 SMSFs increased from 61 at December 2016 to 85, and now service 28,841 funds or 18.7 per cent of the market, compared with the previous year where they only serviced 16.9 per cent of SMSFs.
Firms that have between 501 and 1,000 SMSFs, referred to as emerging administrators, also saw growth. The number of firms in this category increased from 9 to 16 over a 12-month period. Collectively, firms this size now service 9,919 SMSFs or 6.4 per cent of the market, up from 4.4 per cent.
All SMSF firms servicing 251 SMSFs or more now account for half of the SMSF market.
At the smaller end of the spectrum, the proportion of SMSFs serviced by firms with less than 25 funds remained steady at 1.8 per cent.
On the investment side of SMSFs, the report indicated that listed shares remain popular, accounting for 29 per cent of assets, followed by cash and term deposits at 21 per cent.
The report also showed that SMSFs in pension phase have a strong preference for domestic equities over international shares, with domestic equities accounting for 33 per cent of the gross assets for pension SMSFs. Accumulation SMSFs on the other hand only invest 23 per cent of their assets in domestic equities.
Investment in international equities sits at 1 per cent for pension SMSFs and 1.2 per cent for accumulation SMSFs.
“This preference for domestic shares is likely to be influenced by the fact that franking credits are heavily used by Australian companies and are not generally available for international shares,” said Class.
The report also indicated that pension SMSFs are less interested in direct property, with the average accumulation SMSF allocating nearly three times as much to residential property. Accumulation SMSFs are also far more likely to invest in residential property and they are 12 times more likely than pension SMSFs to borrow money to do so.