The Self-managed superfund Professionals Association of Australia (SPAA) and Russell Investments has today launched their inaugural annual SMSF report, which finds the sector is set for further growth with future demand likely to be driven by ‘coach seekers’ who are interested in the benefits of an SMSF but need professional support to make the transition.

The research was commissioned by Russell and SPAA and conducted by CoreData-brandmanagement. It surveyed SMSF trustees, non-trustees and professional SMSF advisers during November and December 2010. In total 1,331 Australian consumers were surveyed, of whom 431 were SMSF trustees and 258 high net worth individuals (HNWIs) without SMSFs. A total of 599 responses were recorded for the adviser research.

The SMSF sector is the largest and fastest growing superannuation sector with some $392.9 billion under management, equating to close to a third of Australia’s $1.23 trillion superannuation industry.

Managing director, intermediaries at Russell Investments Patricia Curtin said the research refutes speculation SMSF sector growth would plateau. “This research shows the sector is set to continue to grow steadily with one in 10 respondents who do not have an SMSF likely to set one up in the next two years. Importantly this growth will come from a new segment we’ve called ‘coach seekers’, which if managed correctly could lead to even greater growth ahead,” she said.

Coach seekers would rather do things themselves but need information to support their decisions – or are looking for someone to help them. This group makes up 30% of the population but only one in four have an SMSF, presenting the biggest growth opportunity.

SMSFs outperform

The report confirms the sector is also performing well with an average return over the last 12 months of 10.7% pa for those trustees who made a positive return, representing 98.6% of trustees. These self-reported figures suggest SMSFs have outperformed large super funds, which on average delivered 8.9% pa during the same period.

SPAA CEO Andrea Slattery said: “These returns are among the reasons why trustees are confident about their retirement outlook with four out of five saying they’re on track to achieve their target retirement income of around $1,500 per week.”

This mirrors their confidence in the super system with three in four SMSF trustees (74.0%) saying they’re confident in super as a vehicle for retirement savings – significantly higher than the proportion of non-trustees who share their level of confidence (53.6%).

Contribution cap limits has $15.1 billion impact

Despite high levels of trustee confidence, the retirement savings of around half of SMSF trustees have been limited by contribution caps. This group would have contributed on average $72,704 each to their SMSF if contribution cap limits were raised, equating to a collective contribution of some $15.1 billion. This lost opportunity comes as the research suggests trustees will have to access capital after 10 years in retirement to fund their future.

“SPAA has been calling for the excessively low superannuation contribution caps to be restored to their pre-2009 levels to help people save for retirement. These findings highlight the lost potential of this regime with some trustees still likely to rely on government to support them in their later years of retirement because sufficient sums couldn’t be saved and invested,” Ms Slattery said.

The findings also found trustees were working longer with more than half (53.2%) intending to work part time post-retirement compared to 32% of non-trustees, which has implications for policy makers.

“As trustees work longer, government should look at extending age limits for non-concessional contribution caps to 75 years old,” Ms Slattery said.

Investments outside SMSF are key to asset allocation; low interest in new borrowing rules

While the quantitative research shows SMSF assets are highly concentrated, qualitative research suggests many trustees hold investments outside their SMSF, perceiving their fund as just one aspect of their investment mix.

“The control and flexibility afforded to trustees mean many are complementing their SMSFs with investments outside super or with allocations to large super funds. In fact over one in three trustees (37%) also have investments within a large super fund,” Ms Curtin said.

These findings are consistent with trustee appetite for borrowing within their fund with three in four trustees (75.6%) saying they have not used the new borrowing rules and do not intend to do so, suggesting borrowing to invest occurs outside their SMSF. This contrasts with advisers – two in five say they have advised on the new rules.

While the findings suggest a healthy SMSF sector, Ms Curtin said there was room for improvement. “Some 41% of trustees have no clear investment performance goals and close to one in four rely on gut instinct when forming their investment strategy. This presents an excellent opportunity for specialist advisers to work with trustees to overcome these limitations.

“Further, most trustees (67%) haven’t changed their allocation post retirement. There are often different investment criteria which should be considered in retirement and so trustees need to actively consider these in their asset allocation especially if they are in the decumulation or drawdown phase,” she said.

Trustees appear to be offsetting this risk with high allocations to fixed interest and cash (26.7%) with many waiting for a better investment option (51.9%) or using cash to reduce risk (46.4%).

“High cash allocations are also reflected in the fact three in five (62.6%) advisers said their SMSF clients’ asset allocation has become more conservative post-GFC. Now is the time trustees should be actively considering when they get back into the market and working with their professional advisers on building awareness of what the investment opportunities are out there. For example we are experiencing a notable upswing in the level of investment in the Russell ETFs by SMSF funds,” Ms Curtin said.

SMSF trustees prefer partnership approach; rely on mainstream media

Advisers serving the market would be wise to develop their mentor skills, according to Mrs Slattery.

“The findings highlight trustees are seeking a partnership approach with their financial advisers with around one third using their adviser for high level ideas before making their own decisions. Only one in four rely on them as the exclusive advice provider,” she said.

Reflecting the reduced reliance on advice, trustees say they rely primarily on mainstream media when making investment decisions with around half of trustees basing financial decisions on information sourced from financial and general newspapers, magazines and/or websites.

To access the executive summary and full report for “Intimate with Self Managed Superannuation” please visit www.russell.com.au/smsfreport

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The Korea-Australia Financial Investment Forum has been established to enhance cooperation in financial services and promote the mutual development of the Australian and Korean capital markets and investment funds industries.

The Forum will work on promoting regulatory cooperation; seek to facilitate cross-border investment; collect and disseminate information on the Korean and Australian capital markets and investment funds; as well as support exchanges, organise meetings, seminars, investor awareness and reciprocal visits.

The Korean and Australian economies have both exhibited strong economic performance, leading the world’s developed economies in recovery from the recent global financial crisis. Both countries have sustained an outward focus, welcoming of trade and investment, and have pursued ongoing reforms to foster economic growth and financial sector development.

AFMA, FSC and KOFIA see the establishment of the Forum as a means to further their joint work to develop linkages between Asia-Pacific securities markets and raise the presence of the Asia-Pacific region in international forums related to the securities and funds management industries.

The associations seek to increase investment in the markets they represent, and to foster cross-border investment and financial transactions in each other’s markets. To this end, the associations will be in close consultation with each other on areas for further improvement in the relevant laws, regulations and policies of each market, and will work to enhance cooperation with the authorities governing each market.

In March 2009, AFMA and the FSC each signed bilateral Memorandum of Understandings with KOFIA on closer co-operation.

AFMA and KOFIA are both members of the Asia Securities Forum (ASF) which brings together securities market associations to promote capital flows in the Asia Pacific region.

The FSC and KOFIA are members of the International Investment Funds Association (IIFA) which seeks to promote the protection of investment fund investors and facilitate the growth of the investment funds industry internationally.

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Reasons for the increased barriers to practice ownership include the following:

• Increasing costs
• Downward pressure on upfront fees
• Constant negative media coverage of the financial planning industry
• Increased competition
• Cost / risk of purchasing practices
• More discerning prospective clients.

To obtain the holy grail of practice ownership, your two choices are to build, buy or a combination of both. If you have the funding, the quickest way to practice ownership is to buy, however this comes with considerable risk including:

• Compliance – is the book you are buying a compliance risk? What risks are lurking in the filing cabinet?
• Cost – is the cost reasonable, or would it be cheaper to build from scratch?
• Alignment – are the clients aligned to your style and value proposition?  Will you retain them?
• Poaching – will the exiting financial planner set up shop elsewhere and poach the clients back?
• Has the client base been burned by the existing adviser?

If your preferred option is to build your practice, here are some tips to help you succeed:

• Partner with a dealer that will help you achieve your goals via their practice management program.  Advisers generally place a larger emphasis on the level of fees or splits they pay to the dealer but very little attention seems to be given to what you get in return for your fees. If you join a dealer that generates good quality leads, does it matter if you are paying them more than the amount you pay your current dealer that generates no leads?
• Differentiate yourself by developing a strong and unique value proposition that will make you stand out from the crowd. In the current market, clients are looking for financial planners that can demonstrate they have a strong value proposition in managing investments and investment risk. Advisers who are strong in this area are the ones currently writing the bulk of new business.
• Build your business on the back of a diversified marketing plan.  This includes developing referral relationships with centre-of-influence and building your profile via advertising, seminars and so on.  Getting the marketing ‘mix’ right is important – because every piece of marketing impacts on the success of your other marketing efforts.
• Wholeheartedly believe in doing the right thing by the client – no matter what. If you genuinely enjoy looking after your clients, and demonstrate a passion for helping them, you will win the client almost every time. This comes naturally to good financial planners.
• Ask every client and prospect for referrals, usually using a ‘softly softly’ approach (as recommended by marketing guru Stewart Paul) such as “If you have any friends or colleagues who also need advice, I’d be pleased to accommodate them. Please feel free to give them one of my business cards.”  Turning your clients into advocates of your service will result in a steady stream of prospects that have already been sold on you prior to your initial meeting with them – so you can expect higher conversion rates from client referrals.  Note that some clients may not refer to you because they think you are too busy – so make sure you let all of your clients and prospects know that you will always accommodate referrals from them.
• Target those people who not only have money to invest but also are motivated to invest it. For some planners, this means targeting retirees and people accepting redundancies.  The key is that you choose target markets which fit your skill & knowledge set – and as a result you will become known as an expert in that area.

The proposed reforms will make the future more challenging for professionals wanting to establish their own practice, but with the right approach the new environment might just work in your favour.

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The Bledisloe Group has built a strong suite of brands across Australia and New Zealand to emerge as New Zealand’s largest provider of funeral services and as one of the top three operators in several key Australian markets. It will be acquired by InvoCare Limited (ASX code: IVC) for A$114 million.

Jon Schahinger, Managing Director of ING Private Equity Access Limited (ING PEAL) commented that the sale was a great example of a classic private equity strategy – “buy and build” in a disaggregated industry.

“Propel Investments identified the funerals sector as one well suited to a buy and build strategy and acquired Bledisloe in December 2005. It subsequently grew the business organically and via acquisitions in both Australia and New Zealand. The acquisition by InvoCare represents another successful investment for Propel and ING PEAL shareholders,” said Mr Schahinger.

The acquisition will be funded through cash and escrowed shares in InvoCare and is expected to be completed by March 2011. The transaction was at a price above its recent carrying value and should result in Propel achieving a 3.3 times return on its investment.

ING PEAL is expecting to receive more than $2.5 million.

In other portfolio news, a venture capital investment of private equity manager CM Capital, Piedmont Pharmaceuticals (www.piedmontpharma.com), has signed a major, long-term deal with Bayer Animal Health for its chewable drug delivery innovations. This will enable CM Capital 4 Fund to make its first return of cash to its investors, including ING PEAL. CM Capital will continue to own 28% of Piedmont which it is holding with expectations of significant upside potential.

More details on ING Private Equity Access Limited and its investments can be found at www.ingpeal.com.au.

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XPLAN is the leading software solution in the financial services industry, providing a comprehensive wealth management and advice platform. Count CEO, Andrew Gale, says he expects XPLAN to bring substantial productivity gains and benefits to the advice and client review process and help deal with some of the upcoming regulatory changes in the financial services industry, such as the requirement for clients to ‘opt-in’ for regular reviews. Through XPLAN, Count estimates that productivity of the advice process could increase by up to 50%.

“There were several key reasons why Count selected XPLAN,” Mr Gale says. “In particular, the comprehensiveness of functionality in advice modules, the flexibility to be configured to uniquely reflect our value proposition to clients and the wider business efficiency and CRM benefits to our network of advisers.”

As part of the software review process, technology providers presented to a Count Adviser Panel, demonstrating how their software solution would work in practice.

“It was essential that a selection of our Count Members were included in the rigorous process to select our wealth management and advice platform,” Mr Gale says. “They are uniquely placed to comment on the technology and solution required to provide efficient and valuable advice to clients. Ultimately, it was clear that XPLAN could provide the integrated and adaptive solution we were looking for.”

Andrew Walsh, Managing Director of IRESS says IRESS is delighted to be selected as a strategic partner to Count.

“At a time where advice businesses are focussed on efficiency and delivery, we believe we deliver the market leading technology that a licensee of the calibre of Count requires in order to provide exceptional advice and service solutions to advisers and their clients,” he says. “It is becoming increasingly apparent that, in relation to technology, the focus of leading dealer groups like Count has shifted,” Mr Walsh said. “Critical to their strategy is the ability to provide their advisers technology which better exploits the proprietary knowledge and unique content that already exists within the group. A truly effective advice process is just as dependent upon what the dealer group brings to the table, as it is on the software which underpins the actual process itself.”

In January 2011, XPLAN will be implemented for an initial pilot group of Count Members, with a roll out across the group to start in March 2011.

Count released its current proprietary system  “WealthPlanner” in 2000. The system will be decommissioned in December 2011.

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BOQ has today announced plans to launch an online share trading service in partnership with independent online broker CMC Markets Stockbroking.

The new user-friendly online share trading platform, BOQ Trading, is scheduled for launch in early 2011 and will offer CMC Markets Stockbroking’s comprehensive range of stockbroking services direct to BOQ customers via BOQ’s website and also over the phone through the CMC Markets/ BOQ Trading client services team. Services include shares, options, warrants and managed funds, all at highly competitive brokerage rates.

BOQ Managing Director and CEO David Liddy said the relationship with CMC Markets Stockbroking would allow BOQ to broaden the product range available to its customers.

“The ability to invest in shares is a popular option for families and individuals and we wanted to expand our financial products offering to meet the growing needs of our active and savvy customer base.”

“With the help of CMC Markets Stockbroking, we believe, we can now match, if not beat, the big banks on product suite, while excelling on service. It’s a great position to be in,” he said.

Mr Liddy added that CMC Markets Stockbroking appealed to BOQ because of its fully serviced stockbroking wholesale solution to help clients navigate the entire investment process.

“It was critical for us to find a solution that provided the best tools and education to make share investing easily accessible for all our customers, especially to those new to the stock market.”

“We will be working closely with CMC Markets Stockbroking over the coming months to fully develop BOQ Trading and look forward to offering the new platform to new and existing customers in the near future,” Mr Liddy said.

Managing Director of Australia and New Zealand at CMC Markets, Barry Odes, said the relationship with BOQ further strengthened CMC Markets’ presence in the wholesale stockbroking sector.

“We’re confident that we will provide the high quality level of service which BOQ is so highly regarded for and we are excited about the announcement of this partnership,” Mr Odes said.

“The flexible nature of our technology is proving to be a real draw card with existing and potential partners looking to stand out in an increasingly crowded market by diversifying the range of products and investment tools they have on offer,” Mr Odes said.

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Chris Freeman, Head of BT Wrap, said the agreement acknowledges Wrap’s continued commitment to working closely with DKN to provide its advisers with a market leading platform solution.

“The strength of BT Wrap is built around collaborative relationships with our partners, and DKN is no exception. We’ve been working with members of the DKN team for more than 10 years now, in fact since the launch of Wrap back in 1997, which is testament to the commitment of both groups to get the most out of this partnership. ” he said.

“We have a strong track record of product and service investment, which we know is a critical factor for groups such as DKN, who are looking to work with a partner who has the scale to invest in the platform. Our upcoming product development reflects the many discussions we’ve had with our partners, and DKN has been a keen participant.

“In particular, we are well into our three year program to build a market leading equities solution with our comprehensive model portfolio tools launching later this year, and we also have projects underway to build a fully integrated Cash Management Account on Wrap and overhauling the Wrap DeskTop to make it even easier to use.”

Phil Butterworth, CEO DKN, said the agreement reflects DKN’s commitment to deliver a market leading platform now and into the future.

“Our agreement with BT Wrap ensures DKN continues to be involved in the ongoing development and enhancement of the platform therefore delivering the most efficient, cost effective and well rounded solution for our advisers and their clients. Through this successful relationship, DKN have introduced pricing reductions across our full suite of platforms administered by BT,” Phil said.

“Our advisers have been very receptive to the recent platform enhancements including the new suite of insurance products and bulk trading functionality and eagerly await the roll-out of the model portfolio management tools.”

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