Advice First managing partner Dennis Perry’s experience in the SMSF sector spans 30 years. He shares with Darin Tyson-Chan the importance of having an SMSF when advising clients about them and how he would like a little legislative stability for the space.
How did your involvement in the SMSF sector come about?
It was basically a result of the evolution and sophistication of our clientele and how it needed to become a necessary advice offering. I’d find it difficult to imagine you would be a financial advice practitioner in this day and age and not be involved to some degree.
So was client demand the driving force to servicing the sector or was it an opportunity you recognised as a practitioner?
It was a combination of things with client demand certainly being one of those. I think access to information through technology has broadened the capacity for clients to retrieve information and they seek to be more in control of their own destiny now than perhaps 30 years ago when I entered the industry. Another facet to that is we’re a firm that practises what we preach, so each of the foundation partners of the firm have always had their own SMSF and we will always extend to our clientele the services, facilities, technologies, products, platforms that as practitioners and business owners we have applied to our own essential world.
What services do you offer your SMSF clients?
Everything from suggesting the strategy in the first place, through to implementation, and then ongoing advice around the SMSF. We also provide fund administration services, but more often than not we tend to find ourselves working very closely with our clients’ existing accountants or moving them to another accountant with whom we have had a long-standing trusted relationship. We could see the need about 15 years ago; the need to set up a financial advice firm that is a team of specialists. So as we sit here today we have six specialist partners in our firm that are all responsible for an explicit stream and they are industry experts in that field. SMSFs and the retirement planning piece has always been at the very core of our business, with the clients serviced from a specialist practitioner.
Is it easier to provide SMSF advice when all of the firm’s key stakeholders have their own SMSF?
Yes it is. It’s not unusual at all for the practitioners in our business, and indeed myself, to sit with a client or a prospective client and discuss with them how we’ve set up our worlds and that’s retirement planning, SMSFs, investment strategies, our estate planning, business protection and family protection. I think it is extremely important that a client knows the person sitting on the other side of the desk about to take control of their financial world hasn’t just read things in a book or aren’t just following a strategy they’ve been taught to implement. If that practitioner isn’t living and breathing the advice they are recommending to their clients, then I suggest the client get another practitioner. When I’m sitting with a client, particularly a small business owner, and we are putting forward a concept to them they may not have considered before of buying commercial property inside their SMSF and I’m able to tell them the office we’re sitting in is an asset in my own SMSF, they then suddenly have a more relaxed kind of look about them. You can see them thinking ‘gee, this guy’s not just recommending it, he’s actually done it himself’. They then revert their kind of questioning from being in the third person to asking me ‘why did you decide to undertake that strategy and how do you do the administration and who did you get your funding through?’ It becomes a far more personal conversation.
So it becomes like comparing notes in a way?
Absolutely. Using a fitness analogy is probably a good way to describe the situation. I mean it would be difficult in my view to go to the gym and be assigned a personal trainer who was in very poor physical condition and had a poor diet and a poor physical appearance. They may have read all the books on fitness training, but if you can’t look at the person and honestly believe they are living and breathing what they are preaching, then you are not going to have quite the same level of confidence as when the practitioner has done or is doing exactly what they’re recommending to their clientele.
My sense is consumers are sick of governments making significant and significant constant change to superannuation rules and regulations. We would love to just have a five to six-year period of having a static environment in which to operate.
Dennis Perry
Are there any trends you’re seeing regarding demand for a particular type of advice at the moment?
We’re seeing a bit of demand for advice around getting the investment mix right and managing fees. SMSF members are recognising they can’t get away with having large amounts of money sitting in cash and still earn a decent return in this environment.
Have any of your clients raised concerns about the superannuation changes included in this year’s budget?
I think it’s heightened awareness of rules and regulations, so the inquiry level has gone up a little, but the level of concern not so much. They’re not pursuing any particular strategies in regard to the proposed changes either. My sense is consumers are sick of governments making significant and significant constant change to superannuation rules and regulations. We would love to just have a five to six-year period of having a static environment in which to operate.
Are the right people establishing SMSFs?
Interestingly over the last two years as a firm we’ve unwound as many SMSFs as we have set up. Now we are very pro SMSF and I’m an advocate and a user of self-managed super funds and it is something that we put forward to our own clientele. But the unfortunate situation is that we have had a large number of clients come to us as a referral from an existing client or from another professional where they are sitting there with an SMSF with less than $100,000 worth of assets in it and without complex investment requirements. So the fees being charged proportionate to the assets make it somewhat unworkable to hold the assets inside the SMSF environment.
When you suggest closing the SMSF, how is that advice received?
I think generally they’re relieved because they have either gone into it on the advice of an accountant or someone else and just assumed that person knows better so it was the correct thing to do. The sense of relief comes because each year they see the total asset value of their SMSF depreciating because the fees are higher than the fund’s earnings. They may have originally set the SMSF up as an ego-based move and the desire of being in control of their own self-worth, but when reality sets in where they’re actually seeing the gross asset value of their fund decrease suddenly they become a bit more focused on the end game of planning for retirement and actually having a growing nest egg as opposed of being able to say to friends they’ve got an SMSF. It’s always the client’s decision to unwind it, but we believe a good practitioner is obligated to say he has seen your fees, returns admissions in the SMSF and let them know if they were to go to a different type of retirement savings vehicle the result would be better.
What would you say is the most significant change you’ve seen to the SMSF sector?
The growth and the number of clients with an SMSF for a start and I know that I’m stating the obvious. Thirty years ago a self-managed superannuation fund was seen only applicable for that top 5 per cent of wealthy individuals to allow them to do things the majority couldn’t afford to do or couldn’t imagine doing. Now it’s commonplace and I think that’s a good thing – people are becoming more educated, more aware and hopefully that leads to more self-funded retirees in our community.
What would be the one thing you’d change about the sector?
Just having less change would be a good change. Look, even if it is as small as a full term of government to have regulation and legislation remain relatively constant just so clients do feel they can plan ahead with confidence as opposed to making the move which is least likely to be affected by the next change. That would give us all peace of mind.
Realistically would the politicians ever be able to achieve that wish?
No, because wherever there is wealth growing in a particular sector, they are always going to want to get their hands on a piece of that pie. It could be through increased taxes or legislating limits on amounts that can go into tax-protected environments. I don’t ever see their motivation for applying change diminishing, but it’s a case of our profession uniting and creating a significant enough push back to say ‘hey enough is enough, we need a stable environment within which to operate for the good of not just our profession, but more importantly the clientele affected by our profession’.
Looking at the coming year, what’s the biggest challenge facing SMSFs?
I’d say it would be the time it takes to deliver implemented advice. It’s too compliance-driven and not enough client outcome-driven. Perhaps the goal should be less meaningless disclosure and more appropriate ones.
