Andrea Slattery

With our national conference behind us, and as a 2014 unfolds amid several inquiries critical to our industry, I thought it was an important time to remind members of the core values that underpin SPAA. These are the values on which we will never comprise, having been inculcated into our DNA over the past 11 years.

Professionalism, independence, advocacy and thought leadership, and an unwavering commitment to improving educational standards to build a profession that allows trustees to make informed decisions. These things are what we stand for; it can be no less.

Realising the importance of these inquiries to our industry and Australia’s future, both our Patron, the former Chief Justice of the High Court, Sir Anthony Mason, and myself, used our opening addresses to the national conference in February to reiterate the principles underpinning SPAA.

It was Sir Anthony who articulated it best when he told the 1400 delegates that SPAA has vigorously encouraged the rise of a system of SMSF professionals, professionals who are dedicated and committed to providing advice to stakeholders in the sector.

It was a message I reinforced when I reminded delegates that in less than 10 years we will witness the first generation of Australians who will have accumulated sizeable assets under compulsory superannuation. Additional skills, capabilities and competent professionals will be critical to advise on how these assets are managed, as well as all the related services germane to our industry.

As we all know, the SMSF sector is, by its very nature, both disparate and diverse. That’s why it requires an umbrella group that understands all stakeholders’ myriad interests and can represent and service those interests.

SPAA is the only organisation that can make this claim because it is recognised by the Government, Opposition, regulators, and the civil service as the preeminent body in self managed super.

The reason this recognition is bestowed on SPAA is self evident; they all know the values we espouse and who we represent – a membership boasting all the skills required of an SMSF professional and having a combined direct reach to more than two-thirds of the one million SMSF trustees. In short, we are the standard bearer for the SMSF profession, the custodian for members/trustees.

This is why SPAA commits to continually improving professional standards and has created a career pathway for existing professionals and new entrants to build our industry, with the focus we place on education proof positive of this.

SPAA has always valued its independence. It is why we only allow individuals to join, ensuring we truly represent the voice of all SMSF professionals.

It was our commitment to advocacy and thought leadership, underpinned by rigorous research, which allowed a more complete picture of our sector to be embedded in the Cooper report, and, be rest assured, this same commitment will typify how we approach the Financial Systems Inquiry, the review of the tax system, and the inquiry into income streams to examine the payment of superannuation and social security benefits.

Andrea Slattery, CEO, SMSF Professionals’ Association of Australia (SPAA)

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Andrea Slattery

The notion that SMSF trustees should have a “competency test” as suggested by the visiting European financial literacy specialist Robert Holzmann has been rejected by the SMSF Professionals’ Association of Australia (SPAA) as “elitist”.

SPAA CEO Andrea Slattery says: “It would seem obvious to point out that anyone running a business, including company directors, trustees of trusts, and partners in partnerships, do not require mandated training to do their job.

“Many of them are responsible for unrelated investors’ money and yet there is no requirement they have formal academic qualifications.

“At least with an SMSF, the trustees are responsible for their own money. Perhaps the simple reason SMSFs have performed on par with the APRA-regulated funds is the simple fact it is their money and they have a greater interest in ensuring it is invested wisely and therefore more conservatively to ensure real gains.

“With the trustees of super funds we could also include the need to have experience as well as qualifications. A person with academic qualifications still needs to supplement that with practical learning if they are to be valued as the trustee of a large fund.”

Holzmann noted that recent statistics from CEPAR, the ARC Centre for Excellence in Population Ageing Research at the University of NSW, showing that 27.1% of SMSF trustees only have a trade or diploma qualification while 13.7% have only completed high school. “If you are not sufficiently equipped with knowledge you are running a serious risk as an SMSF trustee,” he told The Australian. In fact, about 75% of trustees have undergraduate degrees or higher and the trades-people are either small business owners or self-employed.

Slattery says it’s interesting to note that the last APRA Trustee governance report into the APRA-regulated sector showed more than 90% of these funds did not require any formal education training or requirements to be a trustee, and that 81% did not require any superannuation or investment knowledge to be a trustee. Yet APRA fund trustees manage billions of dollars of other people’s savings.

“Finally, when the Cooper Review handed down its final report in 2010, it specifically ruled out formal training for SMSF trustees. People need to be reminded that Cooper said the SMSF sector had been performing well and was well managed and there has been no evidence since to suggest the situation is any different three years later,” she says.

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Not all trusts are the same…

All deeds are not the same.  A deed to establish a discretionary trust is different to a deed to establish a unit trust.  A deed to establish a family trust is different to a deed to establish a superannuation fund.

Sometimes unit trust deeds have to be crafted for their particular purposes.  A vanilla unit trust deed may not provide the best land tax outcome for NSW land tax purposes.  A vanilla unit trust deed may not be the best form of a deed for SMSF investments, as the unit trust may not be a fixed trust for non-arm’s length income purposes.

A recent case has illustrated the downside of simply selecting a deed based solely on price.  The taxpayer wanted to invest in real estate and, for asset protection purposes, have the real estate held in trust for the taxpayer.

The taxpayer acquired a discretionary trust deed.  This type of deed was used as it was the least expensive way of acquiring a trust deed.  The taxpayer wished to on-lend to the trust borrowed money and also to claim a tax deduction for his interest expense.  The taxpayer was aware that he could not claim a deduction for the interest merely because he was one of the beneficiaries of the trust.

Consequently, the taxpayer had prepared a document which was signed by the trustee of the trust by which the trustee was bound to allocate all trust distributions to the taxpayer unless the taxpayer “renounced” the distributions.   This document was signed immediately after the trust deed was signed.

The taxpayer borrowed the money and on-lent the borrowed money to the trustee of the discretionary trust.  The taxpayer claimed a deduction for these interest expenses and also received distributions from the trust.

The ATO challenged the taxpayer’s entitlement to claim deductions for the interest expense. The issue turned upon the nature and effect of the document which was signed after the trust was established.  In the AAT, the Tribunal held that the document was neither an effective amendment to the discretionary trust deed nor could it be treated as an effective exercise of the trustee’s discretion to allocate trust distributions to the taxpayer.

This finding by the Tribunal broke the nexus between the interest expense incurred by the taxpayer and the trust distributions.  In short, the taxpayer was not entitled to a deduction for the interest he incurred.

The decision does show that not all deeds are fungibles and sometimes deeds must be specially crafted for their intended purpose.  The result for the taxpayer would have been different if either the trust deed was not a discretionary trust deed or if the document which was signed after the trust was established did constitute a valid amendment to the trust deed.

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ANZ release digital SMSF fund.

ANZ yesterday announced the launch of its new digital solution for Self-Managed Superannuation Funds (SMSF) as a further step in its strategy to create simpler and more convenient ways for customers to better engage with their wealth.

ANZ CEO Global Wealth Joyce Phillips said: “This new SMSF solution will enable ANZ to provide clients with an integrated digital product that helps them manage all their self-managed superannuation needs in one place.

“This is a further step in our ambition to transform the wealth industry in Australia. Digital and mobile technology is increasingly driving how we operate and how we serve our customers, and as their behaviours change, we’re focused on finding new ways to better connect customers with their wealth.

“We see an opportunity for ANZ to become a key player in the SMSF market, which today is the largest superannuation segment in Australia with assets of around $500 billion,” Ms Phillips said.

‘ANZ Self Managed Super’ will be made available to customers from early December 2013. The key benefits for customers will include:

• Convenience – being able to have a full view of all SMSF assets and information in one online dashboard so that decisions can be made in real time; industry leading simple application process;
• Control – 24/7 access through an online portal, which also provides reporting, investment monitoring, document storage and underlying product transacting capability;
• Security and compliance – customised alert systems (via text message, email or post) allowing customers to stay on top of their SMSF compliance and legal obligations;
• Value – integration with a wide range of products and solutions across wealth, retail and commercial banking;
• Efficiency – completion of tax and audit requirements involved with running an SMSF, underpinned by industrial strength accounting software.

In delivering the new digital SMSF solution, ANZ will partner with specialist SMSF service provider Super IQ Pty Ltd.

As part of this agreement with Super IQ, ANZ also announced today that it had agreed to sell its wholly owned SMSF accounting, tax and compliance business, Super Concepts Pty Ltd to Super IQ.

The sale of Super Concepts is not material to ANZ and will be completed by close of business today. The terms of the sale were not disclosed.

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The OneVue / Investment Trends 2013 SMSF Accountant Report reveals 28 per cent of accountants, up from 22 per cent in comparison to a year ago, are preferring not to refer SMSF clients to multiple financial planners but rather one trusted source that they have cemented a relationship with.

OneVue head of partner solutions Brett Marsh said individuals who are recommended to seek advice from a third party expect to be referred to someone who is skilled in SMSFs and who their accountant has confidence in.

“If accountants are going to encourage SMSF clients to engage with a new specialist, having a trusted relationship with that specialist is vital both in terms of client satisfaction and client retention,” Marsh said.

“With a number of mergers taking place between financial planning and accounting practices across the board, those that don’t offer an all encompassing service for SMSF clients are seeing greater value in building alliances with trusted professionals in order to remain competitive.”

Marsh said according to the OneVue / Investment Trends 2013 SMSF Accountant Report, 85 per cent of accountants have SMSF clients with investment-related queries, so having the qualifications or the contacts to provide that advice is a valuable service advantage.

“It’s not just the relationship between accountant and adviser that’s important though, it’s also the means by which they can work together, something we’ve been focusing on a lot at OneVue, particularly with the roll out of our new SMSF services for accountants and advisers,” Marsh said.

“In August this year we launched an accountant login so that accountants, like advisers who use our Unified Managed Account investment platform to administer their clients’ SMSFs, can get secure online access to comprehensive reporting that is provided both daily and as part of the end of year tax report.

“This includes substantiation documents that have been received throughout the year and which are required to complete the SMSF audit, as well as additional online reporting such as portfolio valuations and BGL Simple Fund download files.

“We also created the Accountant Ready solution, which includes data loading into BGL Simple Fund software and electronic workpaper preparation.

“These initiatives allow the accountant who the adviser is working with to view the client’s investment portfolio and more efficiently complete the accounting, compliance, audit and lodgement as required.”

Marsh added that the offering had generated a lot of calls from interested parties because it allows accountants and advisers to work in tandem while removing a lot of the administration work for accountants.

“We see that there is a growing importance being placed on adviser and accountant relationships and it is something that service providers need to support and make simpler going forward,” he said.

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Wealthrac release new mobile app.

Independent wealth product distributor Wealthtrac, has launched a mobile application that is designed to deliver news and information to anyone interested in self managed super.

Wealthtrac Managing Director and CEO, Matthew Johnson, said the development was an important step forward for the business and its adviser clients.

“Our cloud-based SMSF platform brings together all SMSF administration and reporting needs into one centralised hub,” he said.  “The ease of administration and level of reporting provides significant time savings for the accountants, advisers and trustees who use it.   This means they can focus on the areas that truly add value for their clients and their business.”

“Our App will also assist in this process by providing the latest SMSF news, access to SMSF education documents and will allow trustees to find their nearest adviser.  Users will also be able to set up an SMSF.  We believe this is the first time an SMSF has allowed for this level of functionality.

Mr Johnson said Wealthtrac is committed to developing products and services that enhance the client-adviser relationship.

“At Wealthtrac, we have a very strong belief in the independent advice model and all our services aim to strengthen the adviser-client relationship.   Self-managed super is probably the most complex area of superannuation.  Unfortunately, it is also where people seek the least advice but actually need the most help,” Mr Johnson said.

Mr Johnson said he believes the ability to focus on delivering investment and strategic advice, will be what defines the SMSF advice industry in the future.

“At a recent event hosted by Wealthtrac, a number of senior industry figures expressed concern that not enough is being done to protect SMSF investors from poor investment and strategic decisions.  The debate on the enshrinement of the term ‘financial adviser’ also rages on,

“But we believe what will set qualified advisers apart from the spruikers, is education and the ability to deliver advice on complex areas such as estate planning, contribution caps, related party transactions and other trustee responsibilities.    Excellence and ease in administration tools will underpin this success, but it is the advisers themselves that will make the real difference.”

Mr Johnson said the Wealthtrac SMSF platform offers:

• Instant tax reporting, which enables advisers to optimise a client’s tax position throughout the year, instead of at year end when it is generally too late to fix a tax problem
• An in-built compliance engine, which sends out alerts if a client breaches a super regulation allowing advisers to fully protect their clients 24/7
• Wrap-style reporting tools, with mobile access, provide a range of online reports on current performance and transactions.

“Our single monthly fee starts at only $140, and we have no asset based fees, no fee based on the number of investments, and we don’t charge extra to start a pension or commute funds.”

“We believe our range of features and competitive pricing makes the Wealthtrac SMSF platform the leader in today’s market.   With new features planned for release later in the year, we plan to retain our leading position.”

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The role of property investment in SMSFs overstated.

The role that self managed super funds (SMSFs) are playing in the current surge in residential property prices needs to be kept in perspective, says Graeme Colley, Director Technical and Professional Standards, of the SMSF Professionals’ Association of Australia (SPAA).

Colley says despite all the market talk of SMSFs flooding into residential property, the actual numbers reveal it’s still a small percentage of the sector’s $500 billion in assets under management.

“At June 30, property in SMSFs consisted mainly of non-residential property such as commercial property ($58 billion) compared with residential property ($17 billion) out of total of $495 billion. At $17 billion, that’s 3.4% of all SMSF assets.

“In addition, gearing is not the issue its critics allege. According to ATO statistics, geared property in SMSFs makes up less than one half of one per cent (0.4848%) of their total investments.

“It would take a huge shift in investments to influence the real estate market compared with individual investors who use negative gearing to purchase property.”

Colley says SPAA welcomes the current debate because it highlights what SPAA has consistently said – that SMSF trustees need to get professional advice before using gearing to invest in property.

“Property is not an inappropriate investment per se, but it must be appropriate to the fund and consider the member’s circumstances, just like all investments whether they are via an SMSF or personal investment decisions outside superannuation.

“In a low interest environment people are looking for better opportunities for investing, a natural reaction to move out of a low earnings investment. Property is an alternative to interest rates on cash, fixed interest type investments and term deposits, and there are still fears about just how robust the sharemarket is.”

Colley adds that ASIC has said that all investments made by an SMSF, including property, requires advice from a licensed financial adviser. “This requires an examination of whether the investment is appropriate to the circumstances of the fund and its members.

“However, individuals do not require advice from a professional adviser to consider their particular personal circumstances before they invest in geared property. This means a higher risk is associated with the investment and the lenders experience a higher rate of default than the strict lending policies that are imposed on an SMSF.”

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Thumbs up for Xpress Super by the 2013 Smart Investor Administrator Survey.

The decision by the specialist self-managed super fund (SMSF) administrator SuperGuardian to introduce the low-cost option Xpress Super has been strongly endorsed by the 2013 Smart Investor Administrator Survey.

Xpress Super, which was launched in April, has taken the top two positions in all three categories and scored best product for medium balance SMSFs ($1 million).

Xpress Super chief executive officer Olivia Long says:  “We always believed a low-cost option would have strong market appeal, but to have our judgment confirmed so quickly is an enormous fillip for the business.

“Xpress Super provides a complete SMSF solution for the self directed investor – with free SMSF establishment, an online trading solution provided by Comsec Adviser Services and all accounting, tax and compliance provided all for the low fee of $799. [The average SMSF fee is $2700.]

“But it’s not just an issue of cost. We are one of the few firms that insist all our client managers are a SPAA Specialist SMSF Advisor, ensuring the total professionalism of our service.”

Xpress Super, one of Australia’s first paperless SMSF services, uses the state-of-the-art software offered by Class Financial Systems.

Class CEO Rajarshi Ray says: “We are delighted to work with XpressSuper. Its price, service and delivery model are clearly supported by the market.

“For too long the SMSF industry and its participants have been held back by inferior, incumbent technologies that ill serve administrators and trustees alike. The work of Olivia and her team is changing that situation via this service – and we are excited to be part of it.”

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AMP picks up four awards at the CoreData SMSF Service Provider Awards.

AMP has won four awards at the inaugural CoreData Self Managed Super Fund (SMSF) Service Provider Awards, recognising SMSF service providers that have shown their value to both SMSF trustees and their advisers.

The winners are decided using results from CoreData’s SMSF Service Provider Study 2013, which captures the feedback of 1,400 respondents across several categories, separately judged from the perspective of SMSF members and SMSF advising financial planners.

AMP was presented with the following awards in four categories at the awards night held on 13 September at the InterContinental Hotel in Sydney:

• Multiport – Administration (SMSF advising financial planners category)
• Cavendish Superannuation – Administration (SMSF member category)
• AMP Bank – Term Deposits (SMSF advising financial planners category)
• AMP Capital – Commercial Property (SMSF advising financial planner category)

AMP SMSF Managing Director Paul Sainsbury said the fact that AMP was recognised across so many categories, as judged by SMSF trustees and SMSF advising financial planners, was testament to the breadth and quality of AMP’s SMSF offerings.

“These awards serve as acknowledgement that AMP has quickly established a leadership position in the SMSF space. It’s extremely encouraging that both SMSF trustees and advisers have voted us the best in administration and have also acknowledged the quality of our investment options,” Mr Sainsbury said.

“Key to our success with SMSFs is that AMP can participate right across the value chain – so planners and trustees can benefit from a truly integrated approach. From AMP Bank’s term deposits to AMP Capital’s property investment options, and our administration offerings that cater to the different customer segments, AMP has a range of offerings that we believe is unrivalled.”

In each category of the CoreData SMSF Service Provider Awards, the winner is decided on using a combination of service quality rating and preference of members or financial planners. The categories are as follows:

Investment categories

• Australian Shares
• International Shares
• Commercial Property
• Term Deposits
• Cash
• Fixed Income

Non-investment categories

• Residential Property Loans
• Insurance
• Investment Platform
• Administration

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SMSFs looking to offshore investments.

SMSF Trustees, who now control the single largest pool of superannuation assets in Australia, are increasingly utilising advanced stock research tool Skaffold to plan for and manage their retirement portfolio, according to new data from Skaffold members. Additionally, they are more likely to seek information about offshore stocks than other investors.

Skaffold General Manager, Chris Batchelor said more than 35% of Skaffold members have indicated they have an SMSF and that they use Skaffold as a primary tool to make stock investment decisions both in the Australian market and via international bourses.

“SMSF trustees are the fastest growing sector of the Skaffold client bases,” he said.

“As a rule SMSF investors tend to be active investors and at the forefront of seeking out tools to assist with their investment decisions.

“It is estimated that on average, SMSFs now have 45 percent of assets in direct shares, up from around 35 percent in 2007. This compares with non-SMSF investors who typically hold less in direct shares, due in part to holdings in managed products

“Additionally, Skaffold members with SMSFs are three times more likely research stocks in offshore exchanges than members without an SMSF, as indicated by the take up of Skaffold’s Global product.”

SKaffold Global provides analyses of stocks on exchanges in the US, UK, Europe, Hong Kong, Canada, Switzerland and Singapore. SMSF investors are around three times more likely to subscribe to the global service than non-SMSF investors.

“We would expect SMSF interest in offshore markets to continue on an upward trend, as data out of major international economies show improvement. There’s also likely to be slipstream effect with non-SMSF investors following suit,” said Mr Batchelor.

Skaffold also revealed that Flight Centre (FLT) remains the top stock of members with SMSF. FLT featured prominently in the financial press recently, announcing a 23% increase in net profit and 28% increase dividend over the same period last year, with the shares closing on a record high of $48.41 on the day of the announcement (27/8/13).

Interestingly there was a high degree of agreement between members with SMSFs and those without when it came to Top 10 ‘Liked’ Stocks by the respective groups. Both had the same six stocks on the top of their ‘Liked’ list, namely:

• Flight Centre (FLT),
• Cedar Woods Properties (CWP),
• Forge (FGE),
• JB Hi Fi (JBH),
• Cordan (CDA), and
• ARB Corp (ARP).

Leighton (LEI) and Newcrest Mining (NCM) were the two stocks common to both groups ‘Top 10 Most Disliked Stocks’.

There was also consistency in the most popular overseas markets by both groups with the USA and Hong Kong rated #1 and #2 respectively by both groups.

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