AMP financial planner Tony Rigby has been a practitioner for nearly 25 years. He speaks to Darin Tyson-Chan about the changing interests of SMSF members after the GFC and the need for all sector participants to work together more closely.
How did you get your introduction to the SMSF sector?
I’ve been a planner since 1989 and it was a good time to come into the industry. It was post the 1987 crash and it was an enormous amount of change I was seeing with personal superannuation being tax deductible and all these sorts of things, and a raft of other changes in the Labor government years. As we started to move into the 1990s, I saw there would be more opportunities not only in retail super, industry super and public offer super, but also in self-managed funds. At the time AMP didn’t have an SMSF offering, but they did have an alliance with Cavendish Superannuation, so for clients that needed administration they were the preferred supplier. So that’s where my first exposure to SMSFs came in. Back in the 1980s, superannuation was one of the first areas financial planners started to work in and we began to see this growing interest in SMSFs, but we approached this space very, very slowly.
How many SMSF clients do you service and are you still seeing growing interest in the space?
We’re only servicing about 15 SMSF clients, but what we’re finding is a big move within the AMP group into the SMSF space. We’re moving with that and I’m finding it’s a conversation we’re having more often with clients. It’s not that we’re losing clients from the retail fund sector, as has been reported in the media, but we’re finding clients are becoming a lot more receptive to the idea of having an SMSF and want to know more about it. So we do provide more time around education because not everyone is suitable for an SMSF. In fact, some people just shouldn’t have them at all. We’ve actually helped people unwind their funds as much as we’ve helped people go into funds, but I think it’s a conversation you have to have with clients to make sure setting up an SMSF is in their best interest, especially with best interest duty in the FOFA (Future of Financial Advice) reforms. It’s important to make the client aware of all of the various strategies and all of the various superannuation arrangements that are out there.
Is there anything specific clients are wanting out of having an SMSF?
What we’re seeing, in particular after the global financial crisis (GFC), is a bit of a groundswell of support from various fund managers in moving toward dynamic asset allocation as opposed to the traditional strategic asset allocation. There are not a lot of opportunities in other superannuation sectors, such as industry funds or public sector funds, to apply dynamic asset allocation to members’ portfolios. Many clients who have come through the GFC were not aware of this movement. So we’re spending a fair bit of time with our clients having reviews, making them aware of the dynamic asset allocation strategies. So they should be able to do that within an SMSF environment using platforms. Some clients are also after greater transparency and we’ve made them aware of the SMA (separately managed account) market and how that works, and it’s been quite enticing to clients.
Is there any interest in using SMSFs as a vehicle for intergenerational transfer of wealth?
Yes there is. We’re finding clients are becoming more aware of the estate planning side of SMSFs, particularly the idea of an SMSF as the family superannuation fund. I mean, I’ve got a family of four and my wife and I have thought we want to keep our assets going and not have an end date on our super. So I think it’s quite important to engage families on that path and in that belief they can keep their super going through the intergenerational transfer of assets. A lot of the opportunities for this come through shareholdings that were previously owned by the parents, and the ability to in specie those shares into a self-managed environment perpetuate those assets.
How do you go about addressing the compliance obligations?
With compliance if you’re introducing someone to an SMSF and you have the conversation about the pros and cons, we use a lot of the ATO (Australian Taxation Office) publications so our clients can read up on the subject to become better informed. After this we’ll bring them back for another conversation on the subject so they don’t have to make a decision on day one to say ‘an SMSF is the right thing for me’. So if they come back and decide an SMSF is really for me, then we do encourage them to have a look at some of the administration services within the group. I use the Ascend service, which is web-based and provides the client with the same portal we use. I can log in every day and see if the trustee tasks I need my clients to perform have been completed. I find by educating clients and keeping them on song, we’ll be on the same page. The possibility of compliance risk is getting very, very remote and clients are becoming a lot more informed. We’re not expecting to jump on that portal every day, but the systems we’ve set up where we might send a text message to the trustee informing them about a task they have to do means they can see it on their dashboard and they log on and because it’s automated and web based, they’ll normally do their homework within two or three minutes.
You have your own SMSF. Does this make giving advice on the subject much easier?
Absolutely. If you’re going to be advising on anything, I think this type of alignment of interests will always help. When I started in this industry 25 years ago I was in my mid to late 20s with a little bit of insurance, a little bit of super and some ignorance, and the first thing one of the managers at AMP said to me was ‘if you want to understand the product, go and buy one yourself’ and that’s exactly how it is. If you’re going to be professional and proficient in a specific area, then I think you’ve got to have a greater understanding, and in this case if you’ve got your own SMSF and if you’ve been running one for as long as I have, you’ve got to understand all of the ins and outs of the process. So I use my own experience and impart that to my clients. I tell them about the strategies I’ve implemented and the reasons for it. By using myself as the example, the clients feel more comfortable because they think ‘Tony’s not only talking the talk, he’s walking the walk as well’.
Are the automation of the administration and, in turn, compliance the main areas where technology is making a difference in the sector?
The main area I think is through the administration and investment platform data feeds and also the bank data feeds. It means overnight we’re getting investment data and back data and when it all flows through the client’s investment strategy, you can see when it might be out or perhaps overweight in Australian shares and when they do move out of their strategy, the client can then change the investment or change the strategy. So they’re on top of it and will not need to implement drastic retrospective remedial action. So technology is really the cutting edge and that’s what’s going to make it easier for trustees to manage their SMSFs and for planners to engage with their clients and to manage any sort of niggling compliance risk issues.
What’s the biggest change you’ve seen in the SMSF sector?
To me SMSFs have suddenly emerged as this enormous sector and it’s sort of caught up with us by stealth. I don’t think we were quite ready for it. When you look at the inflows and the growth, it now is a bit of a conversation at backyard barbecues or against the golf club bar. So the biggest change is that it has caught up to us like a tsunami in that we weren’t ready for it and there has been this huge move toward them. If you go back 20 years and looked at the most basic fact-find document prepared by financial planning firms, they didn’t even mention SMSFs and it wasn’t a discussion point. Now we have numerous questions in the fact find that broaches the subject. So it’s not one thing; it’s really just the emergence of them.
If you could change one thing about the space, what would it be?
I’d like to see better communication between the participants in the industry. I’d like to see less restriction and less division between the different service providers because it’s the clients at the end of the day that have to come first under all circumstances. One thing that does annoy me is certain participants in the industry, and this applies to the superannuation industry in general, do make inflammatory comments from time to time, creating a division and I’d like to see that stop. We should all work together for a better outcome, so I’d like to see less division and more cooperation.
Over the coming year what will be the biggest challenge for the SMSF industry?
One of the great unknowns is what the government is going to do. Will there be any assurance there will be less tinkering around the edges and a bit more clarity around the rules, particularly around SMSFs? The government said it won’t make any changes in its first term, but one of the great risks has always been legislative risk, so I think this presents the biggest challenge.
