While around 300,000 SMSF trustees still go to an accountant for their SMSF services, Investment Trends research director Recep III Peker said online SMSF administration firms are beginning to capture a much larger share of the market.
Based on Investment Trends research, Mr Peker said online administration firms now service around 112,000 SMSFs – roughly one in five SMSFs.
One of the key reasons these administration firms are attracting a large proportion of the SMSF market is because they are capturing mostly newly established SMSFs.
“In two-thirds of cases, they’re capturing newly established SMSFs. They’re not so much taking it from the existing pool. So if an SMSF trustee used an online admin firm to set up their SMSF, then they tend to use an online admin firm to run and administer their SMSF in the longer term,” Mr Peker explained.
“It therefore becomes very important to understand why people set up SMSFs.”
Traditionally, when SMSF trustees were asked why they chose to set up an SMSF, he said, they would say that they wanted control, or it was because of advice from their accountant, or they would say that they were self-employed and their accountant felt it would work as the best structure for them.
“That used to be the key reasons people set up SMSFs. Now very few are saying that the accountant is the instigator and it was for other reasons,” said Mr Peker.
“If you look at the reasons now, what worryingly stands out is that they’re much more likely to say that they can outperform professional fund managers. There are a growing number of people who are disillusioned with the amount of fees they’re paying for their fund and feel they can do a better job themselves.”
Some of the other common reasons listed is that they want to access property or that their friends has one and recommended it, he said,
“So friends are playing a much greater role which is concerning,” he said.
Mr Peker said accountants act as a “great filter preventing the inappropriate establishment of SMSFs” as they only set them up where the clients has enough money and it makes sense.
This is one of the reasons the online admin firms have grown their share relative to SMSF accountants, he said.
Another reason that SMSF trustees say they go to online admin fees is because it’s cheaper than going to an accountant.
“It’s not just about low fees though. They also want ease of access, especially online access. This is an area where a lot of accountants haven’t sufficiently evolved their proposition and it’s something that trustees really want. They want to have an online source where they can easily see everything in one place and manage their SMSF,” he explained.
Accountants can’t speak to clients about SMSFs without Fact Finds and SOAs and additional fees so its no wonder they go online. So instead of getting some advice from an accountant, they now they just fill in a form and set up a SMSF with next to no advice. Good job ASIC.
The issue is not that an accountant needs to complete a Fact Find and an SOA because that is a required legislative requirement. The issue is that ASIC don’t stop the administrators.
“Mr Peker said accountants act as a “great filter preventing the inappropriate establishment of SMSFs” as they only set them up where the clients has enough money and it makes sense.”
Mr Pecker is saying it is great for accountants to provide financial advice?
Naughty Naughty
There is a difference between ‘online’ administration firms and other administration firms. Exactly how they are categorised in this research is unknown from this article. Even traditional SMSF administration providers would have an online presence.
A portion of trustees surveyed would also categorise their adviser / financial planner as delivering their SMSF compliance as either it’s a combined advice / planning business or the adviser is using a white-labelled SMSF admin solution.
Another way to look at it is in regards to the software utilised by providers:
– BGL – 41% (21% 360 / 20% Simple Fund)
– Class – 27%
– SuperMate – 8%
– Other 10%
– None 14% (spreadsheets, MYOB files etc 😯 )
Source: Investment Trends
What jumps out as a common theme is that accountants who are still working with their SMSF clients the same way they did 10+ years ago are struggling. They are losing market share to businesses with more client-centric business models (including but not limited to online administrators).
This is such a ridiculous article. Accountants cannot provide SMSF advice anymore with regard to set up of an SMSF. So it is obvious people are starting to go elsewhere. Please get your facts correct before writing this sort of dribble.
They can, they just need to do it legally with an SOA, Fact Find and a limited license.
The numbers just don’t add up.
There are approximately 600k SMSFs. 300k serviced by accountants & 112k serviced by administrators leaves 188k serviced by ???
Further the largest administrator SuperConcepts claims to service nearly 25k clients so there is a large hole in the administrator numbers