SMSF Consultants principal Luke Atkins was drawn to work in the SMSF space due its diversity. Here he shares his concerns with Darin Tyson-Chan about the uncertainty over the new accountants’ licensing regime and how financial planners may have already won the battle of legally servicing SMSFs moving into the future.
How did your SMSF journey begin?
My father started PP Atkins and Co in 1972 and was helping people with superannuation from the outset, basically telling clients to put any surplus profits they had into their super because there are tax benefits in doing so and there will be additional benefits when they retire. Then in 2000 I returned from overseas and dad encouraged me to join him in the office to earn some money and pay off some of my debts. At the time, my background had been in hospitality so I started as the office gofer, but then went to TAFE and did the advanced diploma of accounting and began performing administration work on super funds. Then in 2002/03, the Financial Services Reform Act was introduced and the Institute of Chartered Accountants, as it was back then, was doing a lot of presentations about what this meant for accountants. So my brother, who is in the business as well as a chartered accountant, and my dad were going to these presentations and at the first one the presenter said you’re either in or you’re out – you can’t be ‘half pregnant’ with super anymore. So the three of us decided let’s get in because we’re servicing enough super funds to allow us to make a business of this. So we established SMSF Consultants. I then went to a couple more seminars and got to speak to the presenter from the institute. We struck up an arrangement where he would consult to us and help us set up SMSF Consultants. So I moved from PP Atkins and Co to SMSF Consultants and we shifted all the super funds, sent out new engagement letters from the new entity, and the business was up and running.
So from your hospitality background, what attracted you to want to work in the sector?
It was the fact that every day was different and every fund is different and their members have different ideas, wants and needs. It means you’re learning something every day and it’s a fast-paced industry. Just look at how much things have changed since 2003 to today. So what’s going to happen in five years’ time? Also I loved the office environment. I loved the accounting side of it and when I crossed over to SMSFs it was brilliant. Because everyone is different you can get ideas and experiences you can then relay back to your other clients. So it’s like a knowledge shop or knowledge bank for each other.
What services do you offer and what do you see as your competitive advantage?
The thing that sets us apart from other accountants is we only deal in superannuation. We don’t provide general accounting and we’ve specialised in super since 2003. In a practical sense we provide advice and guidance in managing clients’ SMSFs. We listen to our clients and make sure we provide the best advice available through our industry contacts and other industry leaders. This is why I consider our clients to have professionally managed super funds, not SMSFs. We don’t offer any investment services, just fund administration, structuring advice, estate planning and for newer clients we’ve started acting as their mail house as well.
Your website specifically mentions the asset protection benefits of SMSFs. How powerful is this characteristic?
This aspect is really undersold. Some advisers don’t understand the power of an SMSF and the power of asset protection. We all know you can put assets in super and if you don’t engage in any silly business, creditors can’t get at them. But what I find a lot of advisers and trustees don’t know is the control and asset protection available upon the death of a member. During presentations I’ve delivered I always ask who thinks their will covers their super? A large majority of people think it does and are quite shocked when they find out it doesn’t. A lot of people also think their children will behave nicely when death benefits are to be distributed and so don’t need to take advantage of the asset protection aspects of their SMSF. The one thing my dad has always said to clients, and it rings true, is you never know how anyone’s going to react until the money’s on the table. So what I say to clients when they don’t think they need to put asset protection structures in place upon their death is why risk it? Why not document exactly what you want and how you want your super benefits distributed? Sometimes the concept takes a while to sink in, but the clients like it because it gets them thinking about what they’ve got to do. So to me the asset protection side isn’t just about having your assets safe from creditors if things go wrong, it’s more about having your assets safe and protecting your assets so they are distributed exactly how you want them to be when you die.
How critical is the decision to completely commit to solely service SMSF clients and no one else?
In regard to clients, it’s critical because we’ve got clients to whom I provide superannuation advice, but PP Atkins and Co doesn’t do their accounting work. This is because those clients like the fact I specialise in super. It also means your referral partners, outside the accounting profession, can direct you work because they know their clients can see a professional who has a complete grasp on superannuation.
Having recognised the value of building a business around servicing SMSFs early on, do you think accountants might be missing an opportunity if they don’t get licensed to service the sector?
It’s a great opportunity they’ll be missing. The next six to eight months is a game changer for accountants because if they don’t do anything they’re going to lose control over their clients. They’ll be putting themselves in a situation where they’ll be referring clients to other accountants or financial planners and give them the opportunity to take the business. But for small practitioners it’s hard work. The profession has been looking at this licensing regime for a year to 18 months and it’s taken us that long because no one has really known what to do. Nothing seems to be finalised and that’s one of the issues. In the discussion groups I’ve been to we feel the financial planners have trumped the accountants.
How have financial planners trumped the accountants?
Trumped them by adapting to the new regime better. For example, a recontribution strategy poses a grey area when it comes to licensing because of how it is defined. Am I advising a client to recontribute to reduce their tax element in their SMSF and convert it into a tax-free element so their kids get a benefit when they pass away? So that’s a tax issue. A financial planner might then say it’s a contribution strategy so it’s advice and you need to be licensed to do that. But if a financial planner isn’t a registered tax agent, can they give this type of advice because it’s a tax issue? Right now the number of planners who have a tax agent’s licence far outweigh the number of accountants who have an Australian financial services licence. So the financial planners seem to be more astute in getting what they have to get done to continue providing their existing services than the accountants are.
What’s the most significant change you’ve seen in the sector?
I’d nominate two changes. One is Peter Costello’s budget in 2006 when he changed the face of pensions. That budget changed super from eight components to two, it got rid of the reasonable benefit limits and it brought in a cap on non-concessional contributions. The second would be automation and the software that’s available now. I currently use Class Super, which is cloud-based software, and it’s brilliant, but when I started in the industry I was using a desktop application that was terrible.
What would be the one thing you’d change in the sector?
I don’t know why only four members are allowed in an SMSF and no one can tell me why this is so. It’s a question clients ask quite often, particularly if they have a family of five. So that’s one thing I’d change. Another is the constant notion the government is going to make changes to the way superannuation is taxed. It affects the industry. I don’t think I’d actually change the tax system, but perhaps a proper review of the system is needed.
What’s the biggest challenge facing the SMSF space in the next year?
Definitely the licensing. What practitioners will end up doing, what service providers will be providing and what the Australian Securities and Investments Commission (ASIC) will be doing. Does ASIC have enough manpower to police what will be going on and will it be able to enforce the new rules properly to deter illegal activity from happening? It will be interesting to see what accountants do too – whether they change their business model and bring planners in, whether they outsource the administration and the advice to planners or other accountants, or whether they do nothing and just run the risk.
