Leedam Sheppard & Associates principal adviser Lee Virgin shares his organic journey into the SMSF space. He tells Krystine Lumanta why a more engaged SMSF client is rewarding and the biggest challenge for advice businesses right now.
How did you get into the SMSF space?
My background after leaving school was as a specialist loans officer with the Commonwealth Bank until 1988 and then I joined AMP as an insurance agent selling savings plans, super funds, insurance and the like. In 1994, I switched to Hillross because I liked the aspect of an independent financial planning arm and offering more than just product. Also, I was encouraged to study. I did that for a couple of years and then SMSFs became a natural progression for our clients from using either employer or retail super funds, and also our client base was becoming more aware of the options around super and having more control over their decision-making.
What education and qualifications have you completed?
After speaking to a colleague about seeing myself move into other areas, I started my Diploma of Financial Planning and completed it in 1998, then went on to do the certified financial planner designation in 2000. That’s where I got some interest and knowledge of SMSFs from, though primarily it had more to do with investments, but did morph over into SMSFs rather than retail or employer funds. At the beginning, SMSFs were brought to my attention so it wasn’t a pre-emptive move to work in this area. Moving to Hillross basically gave me access to other product providers and at the same time SMSFs were becoming popular because only a small amount of people had them. Our clients were asking us more and more questions about them so the interest levels certainly spiked during that time.
What are your thoughts on the new education requirements for advisers?
I think the more stringent, the better. I’m one of three directors here and we strongly support the new education requirements. It will only place advisers in a better position, being a high-credential practitioner. You can’t just have a run-of-the-mill understanding of the industry; it’s complicated enough as it is. To be honest, the bar could be lifted even higher.
What are your responsibilities and what key services do you offer SMSFs?
We have 12 staff, which is comprised of five advisers, three being principal advisers, and seven support staff. Our key responsibility centres on ongoing strategies and investment advice. That leads into our services, which is the implementation around those strategies. We’ve also taken on more of an education role for clients covering changes to their strategies and research on asset allocations, for example. We’re spending a lot more time discussing these issues and keeping them as up-to-date as possible. Not every client can take everything in and understand it all, so they depend on us heavily, which sits comfortably with us because we’ve been doing it for so long. Education has become a critical part of our services. I think what’s driven this has been the constant regulation changes and government input. I’d say it goes back as far as pre-global financial crisis where there were more generous limits on contributions for super, but, as we know, they have gradually been brought down.
What do you enjoy about servicing SMSF clients?
The interaction with them – they are much more engaged, so it’s a very nice relationship to have and they appreciate our work, and value our involvement and advice. They know that if we’re making a suggestion, it’s for a good reason and not something out of the blue. Our relationships with our SMSF clients are much stronger, and I’m sure other SMSF advisers will agree, it’s a different type of relationship and much more interactive since an SMSF requires a fair bit more communication and correspondence. Our client base is quite mature, so a lot of them have been with us for 20 years.
What’s the issue taking up most of your time?
The new super changes are taking up most of our time right now. We have a couple of advisers working weekends because they can’t keep up with the tight timeline. The $1.6 million transfer balance cap for pensions is a big one for the industry, as well as dealing with the reduction in contribution limits and maximising them where we can. We’ve always believed a lot of changes are negative because of the disruption it causes to clients. They don’t like constant changes. It’s very frustrating for them and it impacts their confidence because they are seemingly seeing changes all too often. We’ve found the current changes have brought about a huge amount of work for our advisers and it’s placed an enormous strain at the back-office level. The impact at the adviser level has been significant. You almost have to drop everything else to ensure you have all of this done before the deadline. I think some advisers are very scared from a compliance point of view that they possibly missed something somewhere in the process. This is certainly a strong focus of ours.
What’s the biggest change, positive or negative, that the sector has experienced?
The removal of the accountants’ exemption has caused confusion around which industry can do what, and that confusion has come back because of these super changes. There needs to be further clarity for practitioners and some clearer guidance on responsibilities would be beneficial.
What’s something you’d change about the industry?
How long’s a piece of string? I think there are so many little things that could make life a little easier, but I guess education sticks out. I don’t think there’s enough regulation around regular testing of advisers’ knowledge to ensure they maintain the capabilities required to advise in this area. We often come across people who are seeking a second opinion and during the course of discussion, we discover that the information they were given wasn’t accurate. And also I think a review of the compliance regime would be good so that it wasn’t such an overburden for the industry. A more simplified approach to compliance would be very welcome.
What’s the biggest challenge over the next 12 months?
For us, as a business, it’s compliance. We always make sure we’re following a high compliance standard. Across the industry, I’d say it’s the same. For anyone in a firm it’s about making sure that their advisers and paraplanning staff are really good at what they do.