Asked whether SMSF trustees may be coaxed back into industry and retail funds at the retirement phase, Equipsuper executive officer of strategic marketing and communications Geoff Brooks told ifa that the strong bond between trustees and external advisers makes the prospect more difficult.
“It depends on the relationship they have got external to the fund and [whether they] have been with a financial planner or an accountant for years,” he said.
Communications campaigns initiated by industry funds aimed at stemming the flow of members to the SMSF sector cannot compete with the “trusted relationship” many people have with their financial adviser, Brooks said.
“It is very hard to break that down,” he added.
More broadly, Brooks spoke of the increasing pressure felt by industry funds due to the rise of the SMSF sector – which now accounts for a third of all superannuation assets in Australia, according to the Australian Tax Office.
“I think it would be disingenuous to say it is not affecting us,” he conceded. “It is affecting most funds – most industry funds – to some degree.”
He also said the establishment of an internal fund financial planning unit was partly in response to the growth of SMSFs.
“In part to address the potential leakage out of the fund to SMSF at retirement stage, we have set up a financial planning business,” he said.
“That has given us the capacity to offer advice right through to the factual advice at the helpline service level, right through to full service financial advice.”
Thanks to many of you for the great read (and laugh)!
Very interesting looking at the ‘likes / dislikes’ posted for each comment.
Seems to me many of you speak with bravado and commitment to your brand of advice, but I think it, and not too deep down, you all realize ISFs are, again, going to disrupt your cozy existence.
I predict, with confidence, that it will be major ISFs and AMP that dominate the SMSF admin space within a few years and as Geoff Brooks states, solves for the ‘win/win’of self-directed and professionally managed super co-exisiting within the one ‘platform’.
In the meantime boys, you all keep fiddling while your Rome burns around you!
The AFR published an article that in the 2008/09 FY I think it was the industry fund for the ETU (Electrical Trades Union) received a dividend from the admin company that the union itself owned. The admin company’s client was the ETU endorsed industry fund and the dividend in that year was reported to be $5M by the AFR. I suppose “only to benefit members” holds true as long as alleged craig thompson style “benefits” were not paid to union officials!
Thanks WILDCAT. My cynical mind is thinking that a not for profit super fund with too little FUM or membership to pay its administrator from that source is making payroll from the insurance. But not disclosed as “commission”. Sad. Probably couild be found in the accounts in some annual report of the fund or something. To act “in members best interests” it looks like they should wind up and hand over to a big fund with the scale to do so. It might be in the interests of my client and his work colleagues to start asking some questions 🙂 This whole online comment discussion seems to be proving fruitful as we share real insights from wide and different experiences. Well done all.
Paul, it’s not the group rates that a make a difference, it is the amount of profit kept by the fund would be my guess, group rates don’t differ in the scale you mentioned.
Thanks for the tip “Say What”. Yes better to go for full personal statement personal application with Industry fund or any fund. Wildcat, your heads up is interesting too. I recently compared insurance in industry funds for a client who’s default employer fund was with a very small WA based “industry” fund. His premiums there were 2 or 3 times the premiums at Australian Super and what surprised me more is that the underwriting insurer was TAL in both cases. Left me wondering who was getting the difference ! or is “economy of scale” that huge ?
dont completely rely on industry fund auto acceptance, what they do is at claim time they underwrite the claimaint then, and if they had a pre existing condition they would disqualify the claim anyway. What a waste of premium money. Even if it is cheap.
From a clients perspective, better do the underwriting upfront and lock in a quality policy. No one wants to do an insurance application when they are ill/injured and making the claim. last thing they would want to do.
Also they dont have guaranteed renewable, if you read the fine print they have the right to chop and change or take away cover at anytime.
Very few SMSF Trustees refer to an adviser and yet our track record as promulgated several times is very commendable. Advisers, as their comments herein suggest, are only interested in feathering their own nest
Let’s Get Real, good point on auto acceptance. I compared an insurance solution some time for a client against an industry fund. On full commission a retail life offer was CHEAPER than the industry fund solution. This on full adviser brokerage! Given the industry fund get’s group rates which will be cheaper than a retail fund then no wonder the ISN “doesn’t pay commission to financial advisers” they pay it to themselves!!!
very interesting read this morning on investor daily, about the coalition speech, should they win government how they intend to target the indepedence of the industry/public sector/union super fund boards and how they will be in for a bit of a rough ride should the coalition win. I suppose if they point the finger at advisers / wrap accounts / smsf and corporate super its only fair to be scutinised as well. Watch this space i suppose.
Insurance purposes (auto acceptance)is the only reason I have seen. Investment – no.
David H, Likewise I am SPAA SSA and have my own fund and agree with many of your points but don’t underestimate a other very strong reasons. SMSF admin efficiency is only a couple of years away, I have been warning my referring accountants for a couple of years now to tool up or lose out, prices will plummet in coming years for SMSF admin. Also, when you have estate planning issues SMSF’s can be incredibly valuable. Split family situations and other matters offer very compelling benefits.
A further reason, many just don’t like/want big insto involvement and fees, industry or retail. Professional management through funds yes but SMA solutions and others will also grow.
Don’t close too many SMSF’s just yet.
PS: have an SMSF and put money in an industry fund… WT*???
I agree that there are genuine reasons to have a SMSF. Estate planning, reserves, asset protection, gearing, direct property ownership, alternative investments, etc, etc. I am SSA, CFP, etc and have my own SMSF. I am pro SMSF, all I am saying is that in the vast majority of cases I come across the clients needs, goals, concerns, etc can all be addressed via a good wrap account and most trustees I meet do not understand the full responsibility of a SMSF nor do they (or their accountant) proactively do things like update trust deeds, investment strategies, etc. Most just have normal investments, no special strategies and an annual meeting with the accountant to sign financials. Yes SMSF’s are awesome and have great power when needed and when used accordingly, but the vast majority of SMSF’s I see add no value for the client and just increase the costs, admin and compliance burdens on them for no gain over what a Wrap a/c can deliver.
I have read with interest the comments following my initial post & the divergence into pros and cons of SMSF. I note Geoffs diligent defence of his comments with information not in the article. Being a Planner, Accountant, & a SPAA SMSF specialist let me say SMSFs are about far more than just investments. If industry superfunds & planners think that is what a SMSF is they are sadly mistaken & missing an opportunity to truly help their clients. Closing a SMSF because you can invest in a wrap product & achieve the same outcome should also make Dave Hs SOAs an interesting read. Yes some SMSFs get opened for the wrong reason but they also get closed for the wrong reasons. Advisor beware in both opening and closing funds. Geoff good luck if you think that is all that you have to do to keep the SMSF business in your fund.
I’m a SMSF specialist, working with them since 90’s. I have one too & think they can be great. However, as retail funds have evolved, Wrap A/C’s now do 95% of what SMSFs can & even as someone who is very pro SMSFs, I see little need for one in most cases because the benefits most people seek can be obtained via a decent wrap fund. If one wishes to own direct property or pool superannuation savings (i.e with family) or use gearing, a SMSF is appropriate, but for most other desired outcomes (i.e. direct shares, use franking credits to offset contributions tax, avoid CGT through excessive turnover, etc) a quality Wrap fund will suffice.
I am constantly closing down SMSF’s people have set up with their accountant simply on the basis of being able to access direct shares or term deposits. The additional admin and compliance are above many SMSF trutees who have one simply because their accountant suggested it rather than referring them to a reputable adviser.
several progressive industry funds and at least 1 retail have created products that negate the need for SMSF’s. for < $200 pa they offer SMSFf’s major benefits, eg direct share choice and the harvesting of franking credits. no auditor to pay, all the tax done, excellent ( in most) online presence, low brokerage. plus rebalancing on a click.
massive improvements to the service ethic of 1 industry fund is needed. a wider product range is needed, eg more listed investment companies.
just facilitate in specie from diy to retail(x1) and industry (x3) and the SMSF’S industry will be deserted by the large number of smart high and medium net worth people who endure diy super @ the moment.
true control is letting the advantages of scale and cheap data farming handle the scutwork, leaving the pleasure of pretending to beat the market to the empowered converts?
So here is a tip for industry funds. Earn the trust and respect of advisers. Work with us to benefit clients. Go to it. Earn respect.
We are all good people trying to operate in a fundamentally difficult field. People are required (compelled) to fund their retirement through an investment process that 80% simply do not understand no matter how many perfect words are crafted. The other 20% would manage for themselves one way or another whether there was super or not. That 20% always have. The hot potato is the responsibility for getting it right for the 80%. Trustee? Fund? Adviser? naive investor default? Do the job.
Geoff – Yes that is correct. As I understand it industry funds do not have the required vehicles at present. There are of course reports that there will be funds management offerings in future. The issue still remains though that industry funds have a commercial interest in retaining members/FUM & are therefore in reality little different to any other super fund operator including for- profits ( excluding SMSF,s). Despite claims to the contrary.
Peter – You’re assuming that future fund products will be unable to integrate within an SMSF portfolio.
Geoff Brooks – Your recent comment helps a little but doesn’t get away from the obvious question – Will industry funds advisers be product biased? How will that stand up with the introduction of the best interest test? I agree SMSF’s are not for everyone. But do not agree that it is usually likely to be sensible for someone to set up a SMSF & then have a large component of their super assets not in that SMSF.
Just to clarify our position on this. Our financial planning unit was set up five years ago to support members entering retirement phase, not to combat SMSFs. What has been missed in this article is that I said some of our senior planners had been upskilled to provide SMSF advice and that our fund had adopted a different view to most industry funds.
Our view is that a member can retain some investments with the fund and have an SMSF. In other words, it’s not an either/or situation, but potentially an ‘and/and’ situation, which we believe is a far more enlightened view.
I also said we recognised that, for some members, and SMSF is the right solution – the flip side being that there are also many in SMSFs who shouldn’t be.
Most people who set up an SMSF do so for control and their (primarily wrong) view that they can do a better job than professional investment managers/advisers OR because they think they can do as well without the fees. The vast majority of those who set up a SMSF fail to out-perform and the % of SMSF’s invested in cash while the market has rallied hard over recent times illustrates this.
Why on earth anyone who has a mere interest in investing thinks they can do better than someone who lives, eats and breathes investing is beyond me. There are some very valid reasons for setting up a SMSF, but to do so with a view to out-performing the professionals is silly. ANd I rarely see a SMSF with lower total operating costs than a retail fund.
Industry funds have made a fundamental error in universally attacking advisers for so long. They still seem to be in negative mode, i.e seeking to break down the trusted relationship between people and their trusted advisers. But now they want people to trust their Industry Fund advisers !
They should focus on whatever THEY do well, or just be efficient and let the story tell itself. They would be getting a lot more support from fee for service advisers now and in future if their relentless negativity did not stick so much in the throat. On the other hand , the advice industry has sadly provided much to criticise, but not in the way of the simplistic universal claim by industry funds that fees are the end of the only story.
Industry Funds will never “win back” SMSF Trustees UNLESS THEY LIFT THEIR GAME.
They would need to prove they are better than the Trustee on his own.
This being the reason Trustees left in the first place.
The reason SMSF Trustees left Retail/Industry funds(RF’s) in their droves is because the RF’s were unable to provide the same good performance level Trustees were achieving investing outside Superannuation.
Most SMSF Trustees have been investing for years and not all within Super so they don’t really need an adviser at all unless seeking advice/mentoring from an academic.
Clearly the intention of FOFA is to break the bond between the Financial Planner and the client in order to drive more clients back into industry funds.
As hard as they try , Shorten and his union mates will fail
He said the establishment of an internal fund financial planning unit was largely in response to the growth of SMSFs. In part to address the potential leakage out of the fund to SMSF at retirement stage, we have set up a financial planning business.
So, the internal financial planning business has been set up to say NO to clients who want to set up a SMSF, advising them that an industry superfund is best for you.
Does anyone see a problem with this?
This statement just confirms what many of us have thought about Industry Super funds, that FOFA, acting in the clients best interests, and not acting in a conflicted manner HAS NEVER and obviously WILL NEVER apply to industry super funds according to their own words and actions above.
How else can they stop people switching to SMSFs without this sort of conflicted behaviour?
I cannot wait to see how these SOA’s will read.
ASIC are you listening.
yes, interesting finally a union fund executive state this. Still doesnt help that we now have to become only review planners and not new business. Anyway thats life i guess.
I seem to remember the Industry funds putting on adds saying all us advisors were thieves. I for one haven’t forgotten those adds and it will take many years for my memory to fade.