Philip LaGreca

SMSF trustees looking to take advantage of the current rules around non-concessional caps have significantly increased benefit payments, according to the latest SuperConcepts SMSF Investment  Patterns Survey.

In the March 2017 quarter the average benefit payment increased significantly from $16,256 to $27,900.

Overall contribution levels also continued to rise in Q1, increasing from $8,548 to $9,138.  This continues the trend established in Q4 of last year which saw contributions increase by 181  per cent following the Government’s confirmation that the proposed Super changes will come into effect on July  1, 2017. The rise, however, is a reversal of the historical trend where Q1 has always been the lowest quarter each year.

SuperConcepts Executive  Manager Technical & Strategic Solutions Phil La  Greca said the findings clearly demonstrated that SMSF  trustees were looking to maximise current non-concessional contribution rules.

The current $180,000 after-tax contributions cap, and the three-year  $540,000 bring-forward rule remain until 30  June 2017.

Commenting  on the new trend to emerge around benefit payments,  which almost doubled  mainly through the  increase in lump sum withdrawals,  Mr  La Greca said:

“Trustees are implementing withdraw and re-contribution strategies to take advantage of the window of opportunity before July 1. Strategies include making non-concessional contributions  into an accumulation account, starting  a new 100 per cent  tax free pension and making contributions to a  spouse to try  and  equalise member balances and  maximise access to the $1.6 million pension transfer  balance cap for both persons.”

During prior quarters the split of lump sum withdrawals versus pension payments tended to be around 20 per cent versus 80 per cent. In the first quarter of 2017 the split shifted to 40 per cent versus 60 per cent.

Asset allocations largely remained unchanged as SMSF trustees and their advisers focus on dealing with the opportunities around the upcoming changes.

The quarterly SuperConcepts SMSF Investment Patterns  Survey covers approximately 2,750 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group)  and the investments they held at 31 March 2016.  The assets of the funds surveyed represent approximately  $3.2 billion.

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Philip LaGreca

SMSF trustees looking to make the most of the current rules have significantly increased contributions, according to the latest SuperConcepts SMSF Investment Patterns Survey.

In the December 2016 quarter contribution levels almost tripled, increasing by 181 per cent from $3,040 in the September quarter to $8,550.

The rise in contributions follows the Government’s confirmation that the proposed Super changes will come into effect on July 1 2017.

SuperConcepts Executive Manager Technical & Strategic Solutions Phil La Greca said the findings were not surprising and he anticipated contribution levels would continue to increase during the next two quarters due to the brief window of time to make large non-concessional contributions until 30 June 2017.

“The current non-concessional amounts apply for the remainder of this financial year and investors are taking advantage of the limited time available to them. We expect a continued uplift in the level of nonconcessional contributions in the lead up to July 1,” said Mr La Greca.

The current $180,000 after-tax contributions cap, and the three year $540,000 bring-forward rule remain until 30 June 2017.

Cash levels were also up in Q4 (from 18.1 per cent in the September quarter to 18.4 per cent in the December quarter).

Mr La Greca said it was likely the increased cash levels were related to the higher contribution levels being received.

The trend to invest through the use of exchange-traded funds (ETFs) continued to grow, with ETFs representing four per cent of all assets during the December quarter. ETFs were mostly used in the International Equity Sector, which represented 16.7 per cent of all international equity holdings.

The trend to use a limited recourse borrowing arrangement for property continued. The overall allocation to property loans increased to 81 per cent in the December quarter, up from 75 per cent the previous quarter. Meanwhile the number of financial asset loans decreased from 25 per cent to 19 per cent.

“The ATO’s safe harbour guidelines on related party loans explains the continued drop in the number of financial asset loans,” said Mr La Greca.

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,800 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 31 December 2016. The assets of the funds surveyed represent approximately $3.2 billion.

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Peter Burgess

Large SMSFs perform better than small SMSFs because they are more diversified, operate more effectively and have longer experience in the sector, according to new joint research from SuperConcepts and the University of Adelaide’s International Centre for Financial Services.

Released today, the new research report –When size matters: A closer look at SMSF performance – looks at fund characteristics that contribute to superior performance of SMSFs.

SuperConcepts General Manager of Technical Services and Education, Peter Burgess, said the research revealed when a fund reaches a balance of $200,000, the benefits of investment diversification start to kick in.

“Our research shows size matters with large SMSFs performing better than small ones. Performance, diversification and expense ratios continue to improve as a fund increases in size,” said Mr Burgess.

Professor Ralf-Yves Zurbrugg from the University of Adelaide said there is a “double whammy” for those SMSFs with balances under $200,000.

“These funds not only have much larger expense ratios compared to larger funds, but they also lose out due to their inability to achieve adequate levels of investment diversification,” said Professor Zurbrugg.

Large funds are more efficient in their operation, in terms of the direct expenses involved in managing an SMSF. When a fund reaches $550,000 under management, its expense ratio dips below two per cent and diversification and performance is comparable to the largest funds.

When size matters: A closer look at SMSF performance is the first in a series of reports to be released by the SMSF Centre of Excellence which aims to examine the relationship between fund activity and performance, diversification and performance, and the relationship between trustees seeking advice andperformance.

Using data from over 20,000 SMSFs from 2008/09 until 2014/15, the report examines how fund size affects performance as well as other fund characteristics including investment diversification and expense ratios. SMSFs in the data set have outsourced their administration, and possibly other aspects of their operation to an external party.

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Philip LaGreca

SMSF trustees have continued to reduce their exposure to the ASX’s top 10 stocks by market capitalisation as they maintain their search for greater yield and capital growth, according to the SuperConcepts SMSF Investment Patterns Survey.

In the March 2016 quarter, investments in the ASX’s top 10 shares by market capitalisation were significantly reduced from 20 per cent of fund assets invested in 2015 to 14 per cent at 31 March 2016.

SuperConcepts Executive Manager Technical & Strategic Solutions, Phil La Greca said the continued volatile markets are driving trustees to search for investments that drive better returns.

“We’ve seen a significant amount of SMSF trustees diversify away from Australia’s largest stocks. However rather than investing in different asset classes, we’re seeing a trend where trustees are investing in mid and small cap stocks on the ASX.

“It has been an effective strategy with the strong performance of smaller companies on the ASX helping to drive better returns than the index for SMSF trustees,” he said.

The trend to invest in other stocks on the ASX has seen the overall allocation to Australian shares increase marginally from 35.4 per cent to 35.8 per cent over the quarter.

“While many trustees have benefited from this approach, there still remains an opportunity to further improve diversification with SMSF trustees continuing to be heavily weighted in domestic equities,” Mr La Greca said.

During the March 2016 quarter, investments in international equities decreased slightly from 12.9 to 12.6 per cent while funds invested in fixed interest remained steady at 12.3 per cent. Investments in cash increased 0.4 percentage points during the quarter, now representing 18.4 per cent of all assets held.

“Over the past two years we’ve seen the amount invested in cash continue to increase with many trustees deciding not to renew term deposits in the current low interest rate environment,” Mr La Greca said.

Contribution levels to SMSFs in the March quarter were at the lowest level in two years with the average contribution inflow per fund $5,426, down from $6,393 the previous quarter.

“While we typically see a decline in SMSF contributions during the March quarter, this year has been particularly low. This could be a result of concern about speculation on proposed superannuation changes which was top of mind for many trustees during the quarter,” Mr La Greca said.

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,900 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 31 March 2016. The assets of the funds surveyed represent approximately $3.1 billion.

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Natasha Fenech

AMP SMSF has announced the acquisition of SMSF administration business, Justsuper, continuing to grow its market share in Australia’s $500 billion SMSF sector.

Effective immediately, AMP SMSF has wholly acquired the Justsuper business, which has more than 1,000 funds under administration.

AMP SMSF Managing Director, Natasha Fenech said the acquisition is consistent with the business strategy to build market share and efficiency in scale.

“We’re excited to announce the acquisition of Justsuper as we continue to grow our SMSF operation.  It places the business in a strong position for future growth and further cements our leading position in the SMSF administration market,” she said.

Following the acquisition, Justsuper will continue to operate under its own brand name and with its existing team of employees, with no disruption to clients.

Stephen Doulgeridis, Chief Executive Officer of Justsuper commented: “This is great news for Justsuper and its clients.  We will continue to operate in the same way we always have.  Clients will now benefit from a broader range of market leading SMSF administration platforms as well as having access to AMP SMSF’s team of highly regarded technical experts,” he said.

Mr Doulgeridis will sit on the AMP SMSF Leadership Team reporting to Ms Fenech, with a focus on continuing to manage the existing client relationships.

Self-managed super funds continue to be the fastest growing segment of the superannuation market with more than one million Australians a member of an SMSF, representing more than $500 billion in assets under administration.

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Philip LaGreca

SMSF trustees are improving their portfolio diversification with a significant increase in allocation in international shares during the first quarter of the year, according to the latest Multiport SMSF Investment Patterns Survey.

In the March 2015 quarter, holdings in international shares increased to 14.4 per cent, a 1.9 percentage point increase compared to the previous quarter. The flow of funds into international shares has seen allocation to Australian equities drop to a year-low of 38.6 per cent, down from 41.6 per cent the previous quarter.

AMP SMSF Administration Head of Technical Services Philip La Greca said the increase in international share holdings is a positive sign of increasing diversification.

“We’ve seen a significant amount of SMSF trustees take their profits from Australian equities following the dividend declaration season and re-invest into the international share market, most often through pooled vehicles.

“SMSF trustees are looking for new growth opportunities for investment, with an increasing focus on international markets. Due to the complexity of investing overseas directly, managed funds continue to be the preferred vehicle to invest overseas with 88.2 per cent of trustees investing in pooled structures.

“Due to the decrease in allocation to Australian equities, we have seen a significant drop in SMSF exposure to the most commonly held investment. While the major banks and Telstra remains the top of the list for investment, the representation of top 10 stocks in SMSF portfolios has reduced from 19 per cent to 16.8 per cent during the first quarter,” Mr La Greca said.

The first quarter of 2015 also saw the average contribution inflow per fund decrease from $13,715 in the December 2014 quarter to $6,120 in the March 2015 quarter, which is typically the lowest quarter in the financial year for SMSF contributions.

“We’ve also seen the average pension payment made by SMSFs decrease significantly for the quarter, dropping from $21,105 in December 2014 to $11,588 in March 2015, however this is largely in-line with the March quarter from previous years,” Mr La Greca said.

While the property market in some parts of Australia has continued to grow strongly, borrowing in an SMSF for a property purchase remains stable at 17.5 per cent, only a slight increase from the previous quarter at 16.1 per cent.

“Around 37 per cent of all property holders have a gearing arrangement in place, only a slight increase from 35.9 per cent in the last quarter. The average loan amount for property purchases increased $10,000 from the previous quarter to $273,000,” Mr La Greca said.

The quarterly Multiport SMSF Investment Patterns Survey covers around 2250 funds, a sample of the SMSFs Multiport administers and the investments they held at 31 March 2015. The assets of the funds surveyed represent approximately $2.6 billion.

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Tim Keegan

Self-managed super fund (SMSF) trustees find choosing what to invest in the hardest aspect of running their own fund, according to new research by AMP Capital.

Twenty-seven per cent of trustees surveyed by Investment Trends for the research said investment selection was their most difficult task followed by keeping track of changes to SMSF rules and regulations (24 per cent), paperwork and administration (23 per cent) and finding time to research investments (19 per cent).

The vast majority of trustees (76 per cent), however, had made at least one new investment for their SMSF during the last 12 months, while 35 per cent had made between two and five investment changes and 16 per cent had made between six and ten changes.

Thirty-eight per cent of respondents had made a substantial shift in their SMSF’s asset allocation during the same period. Of that number, 24 per cent adopted a more defensive stance, 24 per cent increased diversification, 23 per cent changed their asset allocation because of their positive outlook on Australian shares while 22 per cent wanted their fund to focus more on income.

AMP Capital Head of Self-Directed Wealth and SMSF Tim Keegan said: “More than half the respondents to our survey said they set up an SMSF because they wanted more control of their investments and yet they identify investment selection as their most daunting task. It is also a task they largely do on their own: 44 per cent stated they make all the investment decisions for their fund, 23 per cent said decisions are made together with another member and 17 per cent make joint decisions with their financial adviser.

“The research again highlights the opportunities for financial advisers in the SMSF space. There is a segment of trustees who want advice, particularly in relation to finding the right mix of investments in order to meet their goals. The research also found they would like advice on pension and investment strategies, inheritance and estate planning. Based on this research, we’ve produced a guide for advisers entitled Black sky report: the SMSF opportunity for financial advisers, which contains insights to help them capitalise on the potential of this part of the market.”

In other findings, trustees reported that long-term aspirational goals drove most of their investment decisions (41 per cent) ahead of a need to fund additional personal goals (39 per cent) and to meet day-to-day living expenses (37 per cent).

If they felt their goals weren’t being met, 48 per cent of trustees said they would change the mix of investments while 27 per cent would seek advice from a financial adviser.

Mr Keegan added: “As a fund manager, AMP Capital was also interested to see that portfolio diversification was the main reason why trustees intend to invest in managed funds. They are seeking international diversification, access to different investment strategies and access to investments otherwise out of reach. International equities was the most popular managed fund in terms of where trustees are likely to put their money during the next 12 months.

“The Australian Securities Exchange’s mFund Settlement Service is a way for trustees to invest easily in managed funds; AMP Capital is a foundation member and last year we added six of our funds to the service. A sign of mFund’s potential among SMSF trustees is the fact 42 per cent of respondents would like to find out more about it and would be keen to use a service that allows them to purchase managed funds through an online broker, especially those related to actively-managed Australian and international equities.”

The research is based on a quantitative online survey of nearly 1,000 AMP and AMP Capital SMSF investors conducted by Investment Trends. Black sky report: the SMSF opportunity for financial advisers can be downloaded at: www.ampcapital.com.au/blacksky.

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Natasha Fenech

AMP SMSF is partnering with the SMSF Association to launch a new SMSF education and accreditation program for AMP aligned advisers and their support staff.

The program, which commenced this week, will allow AMP’s 3800 aligned advisers to increase their knowledge and skills in specialist SMSF advice. This up-skilling will be independently certified by the SMSF Association.

Natasha Fenech, Managing Director of AMP SMSF, said: “AMP is committed to raising competency standards in the SMSF sector and helping advisers build their SMSF advice capabilities.

“This initiative builds on our existing face-to-face SMSF specialist course, with the program now extended to include the SMSF Association Accreditation exam that awards advisers with the SMSF Association SMSF Specialist Advisor (SSA) Accreditation designation.

“The accreditation complements a series of new initiatives announced by AMP last year to increase adviser professionalism and expertise,” Ms Fenech said.

As part of the changes announced by AMP last August, all existing and new advisers must hold a Certified Financial Planner® (CFP), a Fellow Chartered Financial Practitioner (FChFP), or Masters in Financial Planning (MoFP) qualification by 31 December 2019 (existing advisers) or within five years of joining an AMP practice (new advisers).

The accreditation program will complement the new education standards for advisers wanting to specialise in SMSF advice. Advisers who successfully complete the Association’s Accreditation exam will be awarded the SMSF Specialist Advisor (SAA) designation. Advisers will also be required to join the SMSF Association.

Commenting on the new program, SMSF Association Chief Executive Officer and Managing Director, Andrea Slattery, said: “This AMP initiative is further evidence of the emergence of SMSF specialists and the critical role they play in leading the professionalism, integrity and sustainability of the SMSF sector that now represents nearly one-third of the $2 trillion in superannuation assets under management.

“Every Australian has the right to quality of life in retirement and the emergence of the SMSF specialist is integral to achieving this goal in our sector of the superannuation market.

“This education option being offered to AMP advisers and their support staff demonstrates AMP’s acknowledgment of the importance of the SMSF specialist and its ongoing commitment to raising competency standards.”

“This partnership also recognises the commitment of both parties to support AMP financial advisers as well as providing a focus on training and education to attain higher professional standards in the SMSF sector.”

Enrolments for the course are now open. AMP aligned advisers can register by visiting the AMP Cavendish enrolment page.

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Natasha Fenech

AMP and the International Centre for Financial Services (ICFS) at the University of Adelaide have agreed to form a Centre of Excellence in self-managed super funds (SMSFs), the first of its kind in Australia. The centre is expected to be operational by the end of 2014.

Using AMP’s expansive SMSF database and the expertise of academics from one of Australia’s largest and most respected universities, the centre aims to provide greater insights into the motivations and behaviours of SMSF trustees.

AMP SMSF Managing Director Natasha Fenech said the time is right for greater analysis into this fast-growing sector.
“We are delighted to be working with the University of Adelaide on this exciting new initiative and believe the skills and expertise we both bring to the table will enable us to provide the industry with thought-provoking and unique SMSF research on a regular basis.

“The fragmented nature of the SMSF sector has made it difficult in the past for meaningful qualitative research to be undertaken but given the number of SMSFs we now administer, we are in a good place to provide the raw data needed to identify trends, motivations and behaviours in this area,” Ms Fenech said.

As part of the agreement the centre will produce regular investment reports using the data provided by AMP to the ICFS, offering insights into trends and emerging issues around asset allocation in the SMSF segment.

The centre will also produce an annual research paper, which will look at the key issues affecting advisers, trustees and administrators. In addition to research, the centre will provide SMSF education to professionals and SMSF trustees. This will further strengthen the ICFS’s reputation as a leading provider of SMSF education and builds on the ICFS’s longstanding relationship with AMP-owned Cavendish.

“We are excited to be partnering with AMP to embark on this research and education initiative and look forward to contributing to the ongoing thought leadership around the SMSF sector,” said Professor Ralf-Yves Zurbrugg, Acting Director of the University of Adelaide’s ICFS.

AMP is a leader in SMSF administration, offering a broad range of compliance and technical services for SMSFs as well as diverse investment opportunities through AMP Capital. Through SMSF Advice, AMP also provides licensing options for accountants.

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Stuart Abley

AMP’s SMSF Advice has debunked the commonly held view that for a typical accounting practice, the cost of establishing and maintaining a limited Australian Financial Services Licence (AFSL) is less expensive than becoming an authorised representative of another AFSL holder. 

Accountants can expect to pay from $20,000 to $34,000 for self licensing, compared to $15,000 to $20,000 for becoming an authorised representative, according to AMP SMSF Advice research conducted as accountants consider their licensing options.

Most accountants view the $1,485 ASIC application fee as their only up-front licensing cost, but in reality, licensing set up can cost accountants about $11,500, more than eight times what most accountants expect.

Many accountants are unaware they should begin business preparations at least a year in advance if they’re planning on acting under a limited licence when the accountant’s exemption is removed.

These are some of the insights AMP’s SMSF Advice has unearthed after speaking with more than 500 accountants over the past year.

SMSF Advice has unlocked six key insights into what accountants are thinking – and not thinking about – when it comes to licensing. SMSF Advice’s special report, To licence or not: The real cost of your decisions, explores the big questions facing Australian accounting professionals.

From 1 July 2016 the exemption which allows accountants to set up an SMSF without the need for a licence will be removed and accountants who want to continue doing this will need to be licensed.

Accountants have a number of licensing options, including obtaining and maintaining their own licence or becoming an authorised representative of another AFSL holder.

AMP’s Head of SMSF Advice Stuart Abley said it’s crucial for accountants to have an accurate understanding of the licensing options available and the implications of each.

“After speaking with over 500 accountants about licensing we know that the big areas of confusion for accountants are around cost and timing,” Mr Abley said.

“The question of licensing for accountants is about how, and not when – the time to act is now.

“Getting ready for licensing is a lot more involved than most accountants anticipate with preparations estimated to take well over a year, including training to meet RG146 competency requirements, collection of documentation, creating compliance procedures, understanding FOFA advice obligations and the opportunity to develop a new pricing structure.

“The choice between becoming self-licensed or an authorised representative of a licensee is an important decision and while most accountants are concerned with the cost implications of change, some are limiting their focus to costs only.

“This is a terrific opportunity for accountants to transform their business by embracing advice and benefiting from the value it can add to their practice with increased revenue and profitability and, most importantly, the opportunity to offer clients a valued service.

“The Australian SMSF asset pool is worth $530 billion and accountants who want to continue to service their clients with SMSF advice, or build strength in this growing sector, have some big decisions to make about the best way forward for their business,” Mr Abley said.

SMSF Advice spoke with over 500 accountants across Australia over the past year and landed on six key insights about accountants and their licensing journey:

• Not all licensing costs are being considered. In the first year, total up-front and ongoing management costs of holding a licence could be as high as $20,000 to $34,000, compared to costs of around $15,000 to $20,000 for becoming an authorised representative of another AFSL holder.

• Accountants need to look beyond financial costs and consider the non-financial, ongoing costs, including maintenance of the licence.  This maintenance work is often carried out by the practice partner, the highest fee earning staff member.  Accountants also need to consider their ability to absorb the risk into their business model associated with becoming self-licensed.

• The type and scope of SMSF advice accountants can give under the licensing options vary. In choosing which licensing option to take, accountants need to be very clear on the type and scope of SMSF and other financial advice they want to provide to ensure they meet all legal and compliance obligations.

• Accountants are unsure about how to incorporate ‘advice’ into their business structure. More than half of accountants are not charging appropriately for the strategic advice they give to clients, pricing it at the same level as a client’s general tax advice, rather than at a more strategic advice level.

• Many accountants are concerned they may be providing advice beyond the SMSF accounting exemption.

• If accountants want to obtain a limited licence and begin offering advice by July 2016, they need to be taking active steps during 2014. Most accountants are unaware that if they are planning to act under a limited licence, they should begin preparing their business at least a year in advance, including undertaking the RG146 training, time for collecting and collating licensing documents and business preparation.

My Abley said the most important question accountants should be asking themselves is, “How do I transform my accounting business now so it remains relevant in the future”, and licensing is an important first step in this opportunity to focus on future growth.

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