Graeme Colley

Industry fears that young people are rushing to set up self-managed super funds (SMSFs) are not supported by the latest statistics on this superannuation sector from the Australian Taxation Office.

SMSF Professionals’ Association of Australia’s (SPAA) Director of Technical and Professional Standards, Graeme Colley, says the figures show the sector is growing strongly, but the preponderance of trustees and members are still found in SMSFs with funds under management of between $200,000 and $2 million.

“The ‘Self-managed super fund statistical report – September 2014’ shows that in 2009-10, 63.9% of trustees and members had FUM within this range, and in 2012-13 this figure had risen slightly to 65.7%.

“By contrast, in SMSFs with FUM under $150,000, there has been a slight decline over this four-period from 20.5% to 17.2%.

“SPAA strongly believes younger people who want to take direct control of their retirement savings should still be encouraged to do so and remains resolutely opposed to any artificial barriers to entry to an SMSF.

“But the notion in some industry circles that young, naïve people are being ‘enticed’ into SMSFs in increasing numbers is simply not borne out by the figures.”

Colley says the figures also help put to bed another furphy – that SMSFs with low balances have an “unhealthy” concentration of their assets in residential property.

In 2010, the percentage of residential property assets in funds with less than $50,000 was a miniscule 0.33%, and by 2013 this figure had only risen to 0.7%.

“Once again it is the funds with assets between $200,000 and $2 million that have the biggest attraction to residential property with average weightings of 4.2% of all assets in 2010, a figure that has only risen to 4.3% by 2013.

“The notion that SMSFs are piling into residential property with their ears pinned back is simply not supported by the ATO figures.

“The statistics relating to limited recourse borrowing arrangements (LRBAs) also are reassuring – and should be heeded by the Financial System Inquiry which has raised this issue.

“In the three months from March 2013 to June 2013, LRBAs nearly trebled (largely due to a reconfiguring by the ATO on how it measures LRBA assets) from $2.6 billion to $8.7 billion, but for the past 15 months to 30 September 2014, the latter figure has only moved to $9.2 billion for the June-September 2014 quarter – hardly an implosion of LRBAs.”

Colley says the SMSF sector continued to grow in the 12 months to 30 September 2014 with 20,173 new funds being established, and, at the same time, the number of funds wound up remained constant compared with previous years.

“This growing number of funds, especially by the older age groups, shows that people are increasingly favouring SMSFs as they near retirement and when they enter retirement and begin drawing down their savings, probably as pensions,” he says.

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Connie McKeage

OneVue Holdings Limited has partnered with digital wealth and research subscription service Eureka Report, a wholly owned subsidiary of News Corporation, to deliver an innovative, independent investment solution in an industry first.

brightday will be a member centric digital investment solution that facilitates investment management, superannuation and pension plans. Utilising OneVue’s technology platform, brightday will provide a flexible end-to-end self managed superannuation fund (SMSF) service, retail superannuation and ability to manage non-superannuation assets.

“OneVue is excited to partner with Eureka Report to deliver a digital service that changes the way Australians manage their wealth. OneVue has a complementary relationship with Eureka Report. Eureka Report understands investors and their financial aspirations, OneVue understands wealth and technology,” OneVue Group CEO Connie Mckeage said.

“The launch of Eureka Report’s brightday represents a natural extension of OneVue as a wholesale provider of technology and services to those that service investors, including advisors and accountants. This strategic relationship with Eureka Report is part of a broader growth plan for OneVue. We are accelerating investment in our platform services division to create a step change in the industry. OneVue remains dedicated to its core customers who have supported the company for many years, and who will be able to leverage off the investment made in platform services over the past 18 months,” Ms Mckeage added.

Eureka Report Executive General Manager James Leplaw commented: “Independent research has shown that almost 10 million Australians want to take greater control of their financial future, including one million people who are considering whether a SMSF is right for them.”

“brightday was born out of a strong desire to give people greater control of their retirement savings and help make better, more informed investment choices and will be accessible to people with low superannuation balances who currently feel locked out of improving their financial future,” Mr Leplaw concluded.

The agreements with Eureka Report are for an initial five year term, with the option of a further three years.In relation to this arrangement OneVue’s prospectus included forecast funds under management of $200 million by 30 June 2015, with revenue to come from investment management and administration fees.

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Vince Pezzullo

More than half of advisers surveyed at a recent Perpetual Equity Investment Company Limited (ASX: PIC) roadshow cited the growth of the SMSF market (57%) as one of the main drivers behind the resurgence of listed investment companies (LICs). Other drivers included the capacity to buy directly and trade on the ASX (57%) and an overall greater understanding of the benefits of LICs (37%).

The increased appetite for LICs by advisers has also been demonstrated through the inclusion of PIC on the major wrap platforms and leading dealer group approved product lists (APLs).

Perpetual Investments Portfolio Manager, Vince Pezzullo, said despite recent falls in the market, it is clear there is still interest in LICs as an investment vehicle among advisers and SMSFs.

“There is increasing demand for LICs because they are transparent and liquid investments and these are features which investors, particularly SMSFs, are seeking,” Mr Pezzullo said.

PIC provides an unprecedented level of transparency – it will be the first LIC in the market to release the net tangible asset backing of its shares (NTA) as at the end of each business day within two business days. PIC will also provide monthly disclosures on top portfolio holdings, and bi-annual shareholder updates and briefings.

Mr Pezzullo added: “As well as providing a regular income stream, PIC’s performance can be easily tracked through daily NTA reporting, and shares bought and traded on the ASX.”

Advisers who responded to the survey viewed a regular and growing income stream (67%), long term capital growth (43%) and exposure to international markets (30%) as being among the top three benefits of PIC. An overwhelming majority (90%) also said global equities were an attractive component of a LIC.

“The Perpetual LIC is attractive because you are getting Institutional capability in a listed accessible structure for all investors,” Matthew Christensen, Director, Hill Capital, said.

PIC offers a diversified portfolio through investment in predominantly Australian listed securities with typically a mid-cap focus, as well as up to 25% of the portfolio’s net asset value in opportunistic allocation to global listed securities.

“These adviser insights cement the importance of having diversification in portfolios, as well as having investments which provide regular income and long term growth. With PIC providing carefully managed dividends and franking credits, exposure to global equities and flexibility and control, we believe PIC is a compelling investment opportunity,” Mr Pezzullo said.

PIC recently achieved a ‘Recommended’ rating from research houses Lonsec and Zenith with both research houses commending Perpetual’s tried and tested investment processes and experienced team.

Perpetual Investments ran five roadshows with advisers across the major cities from 21-30 October 2014, coinciding with the launch of its first listed investment company (PIC).

The offer will remain open until 28 November 2014 with a minimum raising target of $150 million. The offer has been arranged through CBA Equities and Taylor Collison and is being jointly managed by Macquarie Capital, Morgan Stanley Australia and ANZ Securities. The co-lead managers are Baillieu Holst and Lonsec.

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Liz Ward

The peak SMSF organisation, the SMSF Professionals’ Association of Australia’s (SPAA), has launched a new SMSF Trustee Education Program.

The complimentary, online program, developed to assist trustees better understand their responsibilities, has been approved as a recognised SMSF trustee program under the Australian Taxation Office’s (ATO) new trustee penalty regime.

SPAA’s Head of Education Services Liz Ward says: “What this simply means is that when the ATO directs a trustee to complete a SMSF education program after reviewing their SMSF, the SPAA Trustee Education Program is on its approved list.

“What’s also important for trustees to understand is that they can do the SPAA trustee education program without a directive from the ATO – and SPAA urges them to do so because the course, which is split into eight modules, offers critical insights into their obligations as trustees.”

Ward says the course, a SPAA initiative to help build integrity in the SMSF sector, is designed specifically with trustees in mind, addressing their most important questions. “What I need to know, what I can and can’t do with my SMSF and, most importantly, where can I go to for help when I need it?

“Each module has ‘check your knowledge’ questions to help trustees identify what they have learnt and, on successfully completing the program, they are issued with a SPAA Completion Certificate.

“The program is also a great exercise for individuals who are considering establishing an SMSF, giving them a good foundation in all aspects of SMSFs.

“Anyone thinking of starting an SMSF and does the online course will be able to sign the ATO’s mandatory trustee declaration form, confident they understand their role and responsibilities.

“A healthy SMSF sector needs competent participants; it is SMSF trustees, using their own knowledge and skills, combined with their SMSF professional support team, which underpins a sustainable SMSF sector.

“It is very important that trustees, who are taking control of their retirement savings, to also fully understand their responsibilities and avoid any risk of not complying with all regulations – and this course is designed as a good starting point for that knowledge quest,” she says.

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Fiona Parker

“Property as an asset class is a long-term investment, which suits the time horizon of many SMSFs,” says James Dunn, presenter of the first of a series of four Wealth Know How videos that look at property as an asset class for Self-Managed Super Funds (SMSFs).

“Like any investment in a SMSF, the fund’s trust deed must enable property to be bought and property must form part of your fund’s prudent investment strategy,” Dunn says in the recently posted video.

Australians are increasingly going online to educate themselves about their investment options, says Fiona Parker, General Manager of Wealth Know How, Australia’s fastest growing independent online financial education website.

“Residential property is a very popular topic so it is natural that we should explore some of the opportunities as well as point out some of the pitfalls for anybody looking to use property in their SMSF portfolio,” she said.

“We have noticed a marked increased in investor interest related to videos showcasing property themes. This series of videos go a long way to explain the appeal of this type of investment such as stability and capital growth of property investment, and provide a perspective on why they might suit individual SMSF trustees,” said Ms Parker.

“Good research is the foundation of all good investments,” said co-Founder, George Lucas. “These videos offer investors the opportunity to educate themselves about the value of using residential property in their SMSFs.”

“Overall, since the launch of Wealth Know earlier this year, we are seeing an increasing interest in our easy to digest video clips on financial investment opportunities,” Lucas said.

The Wealth Know How website has a range of quick, easy-to-understand financial education videos, covering areas such as term deposits, self- managed superannuation funds (SMSFs), shares, and property investment.

The video clips are free to consumers online. This content is also regularly used by professional financial advisers as a digital marketing tool to help educate and engage their clients.

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Commenting further, Subramaniam describes the current situation regarding responsibility for compliance as the grey or ‘fuzzy’ area of managing an SMSF.  “The trustee maintains it is the role of the adviser whilst the adviser believes it’s the function of the trustee.  With hefty ATO tax penalties of up to 47% plus the Medicare levy on the total value of the SMSF, it is an immensely important area that demands clarity and certainty for investors”.

Currently, in stalemates between the administrator, adviser and trustee, the problem ends up with the administrator to address at the administrator’s cost.

Whilst there are many advantages and benefits of an SMSF, they can be quite complex and the onerous nature of the administration process requires specialist service providers such as ASC to ensure that all legal and compliance requirements are strictly adhered to.

However, the ATO and the specialist service providers continue to find non-compliance in areas beyond the norm where SMSF trustees have failed to maintain assets separately from their personal assets.  In some cases assets were not in the name of the fund but in the name of one of the trustees, exposing the asset to loss if the trustee were declared bankrupt or their business went into receivership.

Subramaniam continued, “Currently there is no requirement to disclose who is responsible for the SMSF compliance as ultimately it all falls into the lap of the trustees as per the regulations – but herein is the problem.  Each SMSF trustee is different and there is no consistency in whom they use as their service providers i.e. investment adviser, financial planner, accountant or administrator”.

“Although there are specialist providers such as ASC, the bulk (perhaps as many as 80%) of trustees use their accountants to service their SMSF obligations and this mainly entails a once a year catch up to have the financials audited and an annual ATO return lodged”.

Subramaniam further asks, “How can compliance and the regulatory requirements be addressed with such a rudimentary and modest level of attention?”

With more and more regulations being passed the administrative process associated with compliance has become the most challenging area for the industry and it is not being helped by advisers and trustees brushing this away and placing the burden onto the administrator service providers.

Over its 20 year history, ASC has invested significantly in technology and is able to provide dedicated ‘real time’ SMSF administration and compliance services which encompasses an online portfolio monitoring and reporting facility for trustees and members of self managed superannuation funds.

The ASC iComply model has proven to be an effective gate keeper and ensures trustees take compliance seriously by informing the trustees and advisers of what can and cannot be a complying transaction whilst ensuring all supporting compliance work and documents have been done.

The ASC team take great pride in providing check lists to ensure any transaction is compliant – including processes to ensure the annual requirements etc are met to maintain compliance.

Subramanian also highlighted the top 4 areas of difficulty for compliance –

1. Related Party Transactions and the complexity of SIS Part 8 associate rules – some transactions may require independent legal opinion to ascertain if Part 8 has been breached
2. LRBA – do not put the cart before the horse and instead have the bare trust in place before any transactions are entered into, etc.
3. Private Unit Trusts
4. Collectables

Although very confident about the future of SMSFs, Subramaniam believes that many advisers are still not conversant with compliance issues.  In his experience the advisers that have the best handle are the dedicated practitioners supported by specialist qualifications such as SSA from SPAA.

“SMSF administration and compliance is an area that demands many years of experience in order to provide this service and facility competently. ASC is determined to maintain its technological edge and position as an industry leader through a steadfast commitment to integrity, professionalism, technology and innovation,” concluded Ravi Subramaniam.

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Andrea Slattery

IOOF dealer group, Lonsdale, has committed to the SMSF Professionals’ Association of Australia (SPAA) to expand its SMSF advice expertise via the SPAA SMSF Specialist Accreditation programs and specialised training and education for its advisors.

Lonsdale is encouraging its advisors to join SPAA and undertake the SMSF specialisation programs to attain independent verification of their expertise and to continue building on their existing training programs.

By joining with SPAA, the peak professional association for SMSFs, Lonsdale, which comprises 100 planning practices and more than 250 financial advisors nationally, will be at the forefront of the new emerging profession of SMSF advice.

“Professional standards that have an independent tick of approval and raise advisor competency will be critical over the coming years as we continue to see the SMSF sector evolve,” says Lonsdale CEO Mark Stephen.

SPAA Chief Executive/Managing Director Andrea Slattery says: “This commitment by Lonsdale highlights the importance of continually lifting professional standards across the industry, as well as creating the training architecture for all professionals in SMSF advice.

“It is imperative that advisors commit to being at the forefront of professionalism because that allows consumers to make more informed decisions based on trusted, competent advice and to be able to build their wealth efficiently to meet their retirement goals.”

Stephen says the commitment to SPAA membership recognises the emphasis the firm places on further enhancing professional standards in a post-FoFA world.

“The partnership with SPAA, which will allow us to access their education, networking and training services, including the ability to obtain the independent SPAA Specialist Accreditation, when coupled with our strengths and competencies, will put Lonsdale at the cutting edge of SMSF advice.

“We are committed to continually raising professional standards by ensuring that the training, accreditation and education that Lonsdale planners get is at a significantly higher level than that required by ASIC. As part of this process, our planners will gain access to SPAA conferences, CPD events and services that will further their education.”

Stephen says that Lonsdale is committed to SPAA’s best practice guidelines for Limited Recourse Borrowing Arrangements (LRBAs) announced recently.

Slattery says the commitment by Lonsdale is an exciting development that highlights where the SMSF industry is heading.

“Recent SPAA-Macquarie research validated the emergence of an SMSF professional who is focused on the importance of continually lifting professional standards, and Lonsdale epitomises the movement of new career pathways for this emerging profession.

“SPAA is committed to providing a range of educational and training offerings for Lonsdale’s financial planners, a keen awareness of current regulations and legislation, and up-to-date knowledge of industry trends in the SMSF sector.”

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Jaime Lumsden Kelly

With the transition period for accountants’ licensing ending on 1 July 2016, now is the time for accountants to decide whether or not they need an Australian Financial Services (AFS) licence.

Senior Lawyer at The Fold Legal, Jaime Lumsden Kelly, who is leading The Fold’s accountant’s licensing services, said accountants who advise clients about self managed superannuation funds (SMSFs) need to make two key decisions. “Accountants need to decide whether they need a limited advice licence or a full licence,” she said. “The limited licence allows accountants to give some kinds of general and personal advice on superannuation – including SMSFs – and provide strategic advice on basic deposit products, securities, simple managed investment schemes and general and life insurance.”

Ms Lumsden Kelly said the limited licence won’t allow accountants to provide full financial planning advice or advice on specific financial products except in the context of SMSFs. “If accountants want to provide full financial planning advice services, they will need to apply for a full AFS Licence.”

The second decision for accountants according to Ms Lumsden Kelly, is whether to obtain their own licence or whether to become an authorised representative (AR) of an existing licensee.

“Acting as an AR does avoid the time and cost of the licence application process and also the ongoing management and compliance requirements,” she said. “It also means you won’t need to appoint a Responsible Manager to satisfy ASIC that you have the capability to provide your services.”

Ms Lumsden Kelly said like anything, there are downsides to acting under a third party licence. These could include:

• Finding a licensee that aligns with your interests, your practice and your clients
• Being bound by the licensee’s approved product list in terms of the products you can recommend
• Restrictions to acting within the confines of another entity’s licence – e.g. lack of autonomy
• Potential loss of independence and impartiality in the eyes of your clients

“There’s no right or wrong answer to which option accountants should choose,” Ms Lumsden Kelly said.  “The appropriate path will depend on the extent of the services offered and the extent to which independence is important. There are plenty of options on offer, so take the time to consider them carefully and seek advice if you’re in doubt.”

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Graeme Colley

Understanding the self-managed super fund lifecycle and knowing how to use that knowledge to benefit clients is the theme of the 2015 SMSF Professionals’ Association of Australia (SPAA) National Conference – the pre-eminent event on the SMSF calendar.

The conference, to be held in Melbourne at the Convention and Exhibition Centre from 18^–20 February, will be appropriately titled “Lifecycle” and boasts more than 36 conference sessions, 50 expert speakers, the world’s largest SMSF exhibition and numerous networking opportunities with like-minded professionals.

Graeme Colley, SPAA’s Director Technical and Professional Standards, who heads the National Conference committee, says: “Every year we face the challenge of making the national conference bigger and better than the year before.

“We know the importance that our members place on the National Conference in terms of technical content, industry updates, networking, and socialising, so the onus is on us to ensure it continues to be the premier event on the SMSF calendar

“Once again we have a high-powered list of speakers including another plenary session that will have the three regulators (ASIC, the ATO and APRA), as well as the Federal Treasury.

“I know from the feedback I got last year how much delegates got from this session, and I am confident the representatives of these four key government bodies will again deliver some fascinating insights into the SMSF sector and the superannuation industry more broadly.

“We have also managed to entice academic Michael Drew to present on the topic of how behavioural issues and what people want influences decision making in superannuation, and Andrea will address the issue of “The SMSF advantage – For all life stages?”

“She will outline why SMSFs are unique and show how the current system is working well to meet the needs of Australians, highlighting the importance of the emerging SMSF profession to help trustees achieve their retirement goals throughout their life.”

Colley says the conference is not all about hard work. Over the three days there will be several social events as well as networking opportunities this event always affords time for.

Registrations are now open, with Early Bird offers available until 30 November, so make sure you secure your seat. In addition, there is the opportunity for industry professionals to sign up as a SPAA member to take advantage of the pro rata annual membership.

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Andrea Slattery

The SMSF profession that has emerged over the past few years is proving to be a significant new professional career pathway for young Australians, says Andrea Slattery, Chief Executive Officer/Managing Director of the SMSF Professionals’ Association of Australia (SPAA).

“Built on the solid foundations of the $560 billion SMSF sector, this profession is providing exciting opportunities for those who have accounting, legal, tax and financial services backgrounds, for example, and are now extending their skills and training to become specialist SMSF advisors.

“These advisors are now using their previous professional experiences to build efficiencies in their service, advice and product development offerings – and SMSF trustees are the beneficiaries.”

Slattery says that in SPAA’s submissions to the Parliamentary Joint Committee inquiry into the professionalism of financial advice and the Financial System Inquiry (FSI) the organisation stressed that there is an emerging SMSF profession where people from a number of different disciplinary backgrounds are specialising in providing advice and services to SMSFs that have become the focus of their advice services.

“The emergence of this profession was also highlighted by the recent research report authored by SPAA and Macquarie that showed that for many professionals in this area their primary profession has become SMSF advice and their traditional profession is becoming secondary, while still supporting their role, but used as a base on which to build their high level competencies as an SMSF professional advisor.

“This rise of the SMSF profession is a direct response to SMSF trustees who are demanding more specialised and trusted advice to achieve their retirement income goals by self-managing their superannuation.”

To keep building the professionalism of this emerging professions, and the broader financial advice profession, SPAA has recommended five areas for fostering greater professionalism:

• Adequate and appropriate education and experience requirements.
• A co-regulatory approach to regulating financial advice.
• Requiring professional association membership for market participants.
• Maintaining high ethical and professional conduct standards in the financial advice profession that each individual must be personally accountable for.
• Establishing professional remuneration models.

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