Scott Girdlestone became involved in superannuation when he joined accounting firm William Buck. He tells Darin Tyson-Chan he’d like to see adviser education standards raised and is worried about the sector being over-regulated.
What was your introduction to the SMSF sector?
I guess I got introduced to SMSFs when I first came to William Buck back in 2001. The firm has had a long history of involvement in the SMSF sector. It’s been a very long and enjoyable road seeing the history of how superannuation and SMSFs have evolved since then.
What sort of education did you undertake back then to increase your knowledge levels about the sector?
There wasn’t any form of industry training back then. But certainly for me to be able to work on an SMSF client there was quite a lot of in-house training to do, and once a month we still do it here in the form of superannuation and SMSF tax training and also operational training. So the in-house education has been quite rigorous and that’s been quite good and has certainly helped with the evolving nature, I guess, of my education in this space.
And have you felt the need for any further formal education?
There’s a really good university course that I believe is part of the master’s in tax at UNSW. So I’m looking to enrol in it. I think that will complement my experience nicely because after 14 years of providing SMSF advice you get a fair amount of industry knowledge.
What about the mandatory educational requirements for financial advisers looking to enter the SMSF space? Are they rigorous enough?
I think it needs to start from a grassroots level. Superannuation is such an important part of the wealth landscape in Australia now, it needs to be taught at university level. There needs to be a superannuation component in a commerce degree or business degree. It can start there, but I think there really needs to be a postgraduate course as well. I believe UNSW is already providing that. So I think on an industry level, education is not quite where it needs to be. We need to have certain minimums. It’s a broad industry incorporating a diverse group of professionals, including accountants, financial advisers and lawyers, and I think a specialisation needs to be carved out that requires a postgraduate diploma at least.
What sort of financial advice do you provide your clients?
It’s varied. SMSFs from our perspective are only a tool and are part of a bigger strategy. Clients might come and see us thinking they need an SMSF to take control of their super, but there are other ways in which they can achieve that. The type of advice we give here is everything from obviously borrowing from super and structuring, property through to income strategies, hedging strategies and obviously the investment piece as well. But it’s centred on a strategic focus first to get all of the necessary elements set up in the correct manner.
What sort of advice do SMSF trustees seek the most?
A lot of it is around property and that’s probably more around the education piece, such as what the role of the trustee actually is and what the associated responsibilities are because they are quite onerous. It is quite extensive and trustees really need to be aware of them. So we spend a fair bit of time educating trustees, or potential trustees, about property and as part of that process helping them decide whether an SMSF is actually appropriate for them in the first place. SMSFs are a wonderful tool in the marketplace, but they need to be used in the right manner.
So what sort of property are they interested in and is gearing involved?
Yeah, quite a lot of people are wondering how they can gear within super specifically to buy property. A lot of the interest is about residential property because I think that’s where most investors start. However, the return components of residential property compared to commercial property are quite different so the appropriateness of one over the other within superannuation needs to be talked through.
Would you say the desire to use gearing is as alarming as some people suggest?
There seems to be a growing awareness of people being marketed to on borrowing within super and how property can work within super. But people need to be aware property is an asset you need to look at well and determine how it fits in as part of an overall strategy. They need to consider the rate of return they need and the non-financial outcomes they’re looking to achieve. I think sometimes that gets a bit lost in the property verses a more liquid portfolio discussion.
Do you feel you need to provide a certain amount of education for trustees?
People that want to run their own SMSF are obviously quite self-directed and sometimes they come in for just a small amount of advice in a certain area. That’s fine, but I think it’s our duty as we see it to still take the time to educate them. From that perspective, if they’re thinking say about investing in property within a super fund, we’ll literally sit down with them and conduct a whiteboard session to help them really understand the mechanics of how it all actually works and whether or not they should be considering it. One of the big things here is obviously cash flow, and the restrictions on borrowing within super, and what you can actually do with property. I think that’s probably one of the more underrated parts that trustees lack awareness of.
Will the greater emphasis on being a specialist change how a client receives advice?
There’s been a lot of talk about managing the interaction between accountants and financial advisers and we’re actually doing it here. I think it’s actually one of the things that is quite attractive about William Buck, and I see it working very, very well, is having the ability to have a sit down and have a meaningful meeting where we can talk about all of the client’s issues. We can have a tax specialist in the room, we can have the accountant and myself in the room. We’re covering most of the bases the client needs when they need them so if we need to bring in for instance, a legal expert, we can do so. It makes for a much more seamless transition for a client and they know that someone is actually project managing their affairs. So our clients do value that quite a lot and I would say that’s actually why we’ve been able to attract clients with very complex situations.
What’s the most significant change you have seen in the SMSF sector?
I think the ability to borrow within super. Prior to clarification it was normally the domain of instalment warrants over specific stocks or an index. However, the instalment warrant arrangement has given rise to the ability to have the arrangement in place for equities or for property. I think that has probably driven a lot more establishment of SMSFs. And again, from our perspective, while we specialise in it and we have a high degree of service and expertise around that type of strategy, time has to be spent assessing whether or not it is the right thing for the client to do.
If you could change one thing about the sector, what would it be?
What probably annoys me a little bit is the fact that the term adviser of any description is not legislated. We don’t have something that says as an adviser this person is qualified to give advice about a particular subject. I think what is really harmful to the industry is people who are pushing a specific investment without looking at the overall strategy, such as the well-documented property spruikers for instance. I think property does have a really good place in the SMSF as part of an overall investment strategy, but it shouldn’t be the sole reason to have an SMSF. Being an adviser is a very trusted position and it needs to be treated with respect. Probably one of the biggest issues I see is people purporting to be advisers when they’re actually not. I think also there probably needs to be a lot more education on what an SMSF actually is because it’s quite a sophisticated structure.
What’s the biggest challenge the sector will have to confront in the coming year?
The biggest challenge facing the SMSF sector is over-regulation. For example, you can’t really legislate for a situation like Storm Financial. People are always going to try to take advantage of others unfortunately and that really bugs me about our industry. I think it is going to cause a greater focus on SMSFs, with increasing speculation the structure is taking advantage of superannuation regulation. I don’t think that’s the case because it’s just a super fund at the end of the day. But it could lead to over legislation, which is unnecessary as I think the rules are pretty good as they are. I would hate to see a situation where SMSFs were unfairly targeted by comparison to other super funds because, at the end of the day, all super funds are governed by the same laws.
