The SMSF sector has long been recognised as one presenting numerous opportunities to practitioners to build a successful advice business. Grant Abbott takes a look at why many advisers have been unable to make this a profitable and successful endeavour and highlights the common pitfalls to avoid.
Here I stand on the eve of the launch of my fifth book, The Guru’s Guide to SMSFs, and as I look back on my 25 years in SMSFs, the four things to which I am truly thankful are:
1. The SMSF market has grown bigger than I expected and that has been great for all of us in the industry.
SMSF assets have hit the $700 billion mark and are well on the way to $1 trillion by 2020. I predicted the $1 trillion in 2004, but to be honest I never really expected it to happen. Then again I am the eternal SMSF optimist. So for 25 years SMSFs have been an untapped opportunity, plus the growth and opportunity promises to keep on coming for the next 50 years. In light of this growth, here’s a question for you: In terms of assets under management, what’s your SMSF prediction by 2030?
2. To have an SMSF career and business rather than being a lawyer or tax consultant.
I started my career with a passion for tax through my Bachelor of Laws degree, which carried onto a Master of Laws degree while I was a researcher at the Taxation Institute of Australia. I could have ended up as a lawyer, but thank goodness I escaped that one through a role as an international tax adviser during a stint at KPMG in the tax division. But as luck would have it, I fell into superannuation and then SMSFs when I was a superannuation manager at Rothschild Funds Management. At the start I thought SMSFs were fascinating, plus with the great tax advantages would be around a long time. I found them challenging, a growth area and a new industry, so was sold on having a continuing involvement with SMSFs. It has given me some great times, opportunities and really I could not have imagined doing anything else.
3. My mental and physical health and stamina have enabled me to push my limits.
I have also been lucky enough to be healthy and have the mental and physical stamina to have presented on more than 1500 occasions, written five books, as well as trained more than 1000 accountants and financial planners to become true SMSF specialists.
4. Great supporters and followers.
I have never been a person to sit on the fence and peddle ATO rulings or copy-cat other people’s ideas and strategies. I have always made sure I followed my own line in being a strategist, innovator, thought leader and most of all someone who is happy to give away his best ideas and strategies. After all, there is plenty to go around. What frustrates me is there are so many professionals in the industry, particularly lawyers, who continually say you can’t do this and you can’t do that. I am not of that ilk. My motto is: “Everything is possible, you just need to find a way.” As such, I have those who don’t like me, but also many who do and for all those who have supported me along the way, thank you and I assure you I will continue to have your back for some time to come. For me there is no retirement.
Anyway, in my 25 years I have seen it all and SMSF professionals come and go, including:
- finance brokers helping SMSF trustees into limited recourse borrowing arrangements,
- stockbrokers selling the latest stock tips to SMSF clients,
- financial planners with a handful of funds,
- administrators with hundreds of funds,
- product development teams looking at building SMSF wealth products,
- accountants providing tax advice for SMSF trustee clients,
- SMSF specialists wholly focused on SMSF clients,
- auditors and actuaries,
- estate planning and superannuation lawyers plus litigators building cases against trustees and professionals, and
- the regulators, including the ATO, the Australian Securities and Investments Commission and various stamp offices, plus the courts.
So why, with such great opportunity, challenge and money on their doorstep, did professionals not go the distance?
1. Not giving SMSFs enough of their time
This is number one on my list of why there has been a revolving door of advisers. I have seen so many advisers preparing to swim in the rivers of SMSF gold, but not dedicating any time to it. My experience shows that for SMSF success you need to put in at least two days a week dedicated to SMSFs. Any less and your desires and goals will not be realised. I can remember when I first got involved in SMSFs I was still doing a lot of tax advice, but slowly added more and more hours per week until in 1998 it became a full-time commitment. So let’s make a deal. I want you to mark out two SMSF days a week in your 2018 calendar. I guarantee by the end of the year your professional life will be challenging, rewarding and a lot more fun. If you think you can’t fill out two days, I can show you exactly where and how to build an amazing SMSF advice business.And for those with an existing SMSF business, mark out your calendar and spend two days a week building, marketing and promoting the business. That means growing it, not just working in it. You might want to read Michael Gerber’s “The E-Myth” over Christmas and realise that to increase the value of your business, you need to work on it, not in it.
2. Not being a strategist
I am going to be brutal here. The robots are here to take administration and compliance jobs away through processing automation. Have a look at bank feeds, which have taken away the laborious reconciliations undertaken by an accountant. Online legal documentation that used to be the bread and butter for lawyers is now automated. The next step is an intelligent system providing basic advice: so-called robo-advice. Now for all of you that believe your mind is beyond artificial intelligence, I recently watched a documentary on the subject that showed a tax-based automatic program provide quick, real-time and accurate answers to a complex tax question, while at the same time and confronted by the same situation, a real-life paralegal was flummoxed by where to start. Even though the robots aren’t ready to build and develop complex family SMSFs spanning family trusts, estate planning and the variety of needs and wants of a family in their wealth-creation structures, they are real and they are coming. They could even provide us with the freedom to channel our strategies into complex algorithms to see if they actually work.
In summary, the highest-paying roles, businesses and careers in the SMSF industry and any advising industry are those that can create, build and implement both short-term and long-term strategies for clients. But to beat, or maybe work with, the robots, you must spend time learning to become a true SMSF strategist – it’s the only way.
3. Getting caught up as an SMSF investment strategist
I have been around SMSFs a long time and experienced the 2000 tech wreck and the 2008 global financial crisis, and if you listen to all of the current financial commentators, there is another shake up around the corner. Now what I have found is that during the run-up, clients aren’t really that thankful, but when markets collapse, watch out. I have seen them sue, go to the Financial Ombudsman, complain, bully and scream. And it is sad to see someone’s capital shrink by 30 per cent to 40 per cent and while it often does grow back over time, the business stress for many is all too much. We have lost so many great professionals who spouted investments all the time when it is strategic advice, particularly in the SMSF arena, that stands the test of time and would have stood them in great stead.No goal or business plan
The best book I have ever read is Napoleon Hill’s “Think and Grow Rich”. It has helped me so much since my 20s. I have even been lucky enough to see my young daughter’s life be shaped by this magical publication.
One of the standout lessons from the book is on goal setting. This quote from the book says it all: “Set your mind on a definite goal and observe how quickly the world stands aside to let you pass.”
So in terms of SMSFs do you have a goal? Don’t worry about a plan as it is the goal that is all important at this stage.
Here are some goals I have seen successful SMSF advisers apply and use. Applying them for yourself and your business could be beneficial:
By the end of the financial year I desire to have more than 50 clients to provide ongoing strategic advice to and have each client leveraging off that advice for growth and success.
In the year ahead I will be building a business that specialises in SMSF advice and has only clients that love what I do, who are likely to pay $1000 a month for my advice, strategies and training and enable me to work four days a week with a day off working on my business.
In the next six months my business will add more than 20 new SMSF clients taken from other professionals with assets of at least $1 million in each fund and no implemented estate planning or pension strategies.
4. Not building a business
I have seen so many wonderful technical experts come into SMSFs so filled with enthusiasm and motivation to only flounder. The business model the SMSF technician uses is a disaster of no systems, undercharging, working seven days a week, over-promising and under-delivering and taking on any client. In contrast, a good SMSF advice business should be streamlined from client acquisition to interview to advice, implementation, referral and cash flow. My final words of advice are if you have an SMSF, you are in it until the end. Tell your clients this and you will have clients for life, but most of all, you will have a channel to provide SMSF advice for the rest of your life for your best clients. It will provide income, a continuing mental engagement, stimulation, get you out and about, plus ensure you are on top of strategies for your family SMSF.