Henderson Maxwell chief executive Sam Henderson has authored three books and has his own TV show about SMSFs. He reveals to Darin Tyson-Chan how his media commitments help him keep on top of compliance issues and how additional education standards for trustees may be needed.
How did you become involved in the SMSF sector?
I got involved in the SMSF sector really from client demand. It seemed to be the growth area of financial advice and most of our clients either had an SMSF or were looking at setting one up. Years ago I did an SMSF essentials course through Securitor to become a specialised SMSF adviser and at that point in time very few advisers wanted to service the sector because they saw it as cannibalising their own industry.
How long ago was that?
It was around 2006 and then we changed our business model, where rather than using platforms and wraps to manage our clients’ funds, we switched to a managed account, and in order to have a managed account the clients needed to have an SMSF. Most of our clients took up the offer to set up an SMSF and then go down the path of the actively managed account that gave them a more direct approach, which for them was cheaper and more effective.
What’s the hardest thing about being an SMSF practitioner?
Hands down it’s compliance. Having to keep up to date with all the latest changes at an individual client or trustee level. That means understanding how the compliance obligations and the super rules and regulations apply to the lifestyle of that client and monitoring that on an ongoing basis. That could involve contributions to super, or business retirement exemptions, or excess contributions, binding death benefit nominations, trust deed updates, pensions and all those sorts of things.
So how do you go about keeping up to date?
I source my information independently because we’re self-licensed. So I read a lot about it and I am involved in the media, which means I get to interview the various politicians and a lot of experts in the field and that really keeps your knowledge up to date. But I think the single best thing that accelerates your learning and knowledge is having to answer client questions and encouraging that process. I’ve always said to clients I don’t know everything, but ask me the question and I’ll find out the answer for you. I think if you have that principle you’ll always progress in terms of the learning and continuous improvement is the key.
What services do you offer your clients?
We set up SMSFs for clients. We also provide the administration of the fund through our accounting arm. Then through our financial planning arm we provide strategic advice regarding contributions, the structure of the fund, the trust deed, binding death benefit nominations and all those sorts of things, as well as general superannuation advice, including how to make contributions and minimise your tax. So basically we’re vertically integrated and we offer all aspects of SMSF advice and we bring in another legal expert who sets up the wills and powers of attorney, with the operation of the SMSF inclusive. We service around 200 funds at the moment, which is a reasonable amount, and we’re increasing this number by about 50 to 70 funds a year.
You’ve written a few books on financial planning haven’t you?
Yes, three books now and the third, called The One Page Financial Plan, is due out in May. I decided to write these books to try and educate people around some SMSF topics. I think education is the key because a lot of trustees sign a trustee declaration, but they don’t necessarily understand what their roles and responsibilities as a trustee are. Even the most experienced ones I’ve seen on a retail level have gaps in their knowledge, so they need advice. What they want though as far as advice goes is the ability to cherry-pick what they need to fill the void, and they’re all different. Some of them will want full financial planning advice, some will want just estate planning advice, some of them just want to know about portfolio management, some of them want to know about term deposits, and many of them these days want to know about how to gear a property into super. So the idea of the book was to educate them in all of those areas to allow them to pick and choose where they want to go into more detail.
How do you generate most of your SMSF business?
We generate a lot of business through the books. We’ve got a lot of people who have read the books and then want to set up an SMSF or have us manage the fund for them. We get a lot of clients from Sky Business as well and of course client referrals help generate business too.
You have your own program on Sky Business. How did that originate?
I approached Sky directly and asked if I could trial a show on superannuation and SMSFs. So we trialled the idea and the show was reasonably successful, so I ended up with my own program on Friday nights. It’s been a progression I suppose. I appeared on Your Money, Your Call as a guest originally and then we recorded a few pilots and they were well received and I ended up with my own show. It has helped the business grow, but not everyone has subscription television and not everyone watches TV on Friday nights, so I’m realistic about the reach I have. But I love it because it’s good fun and it gives me an opportunity to exercise my knowledge in super.
You’re also on the next series of No More Practice as you look to expand. Is this on the back of servicing SMSFs?
The vast majority of our clients are in the self-managed space and they want all sorts of things managed. Interestingly enough and despite the name, they are looking to cherry-pick the services you provide and I think that’s the key to advice. You have to have a scalable model where the trustees can choose what they want or just draw a line in the sand to let people know the areas you specialise in, and if you fit in, that’s great, but if you don’t, then we can’t service you. You’ve got to have a specialised business these days to give you a reason to stand out from the crowd because financial planners are a dime a dozen and most don’t specialise in anything, and they’ll take on any client that fogs a mirror. So you’ve got to specialise in one area to stand out from the crowd and SMSFs for us has worked very nicely.
To what degree do trustees need advice?
I rarely see someone who doesn’t need help. The differentiating factor is whether they want help or think they need help. Many of them need help, but they either don’t have the capacity to pay for it or they don’t want to commit the funds to pay for it. So they can’t justify it in their own mind. This is despite the fact the opportunity cost of not getting advice may far outweigh the actual price they’re being charged. I think that’s the biggest issue. And I think as an adviser you need to be able to articulate the value of the advice.
So what areas do they cherry-pick the most?
For our clients it’s probably portfolio management. Many of them just invest in direct Australian equities and cash, and don’t allocate any funds to bonds or international shares, so they tend not to be well diversified, particularly when it comes to property because they’re getting property from mortgage brokers and real estate agents where they shouldn’t be getting advice. Furthermore, most financial advisers won’t give advice on property because they don’t make a dollar out of it and they don’t know anything about it. It always fascinates me that a financial adviser cannot give advice on shares and property; the two areas SMSFs make money in so therein lie the opportunities.
Do your specialist designations make a difference?
Not from a trustee point of view. Because I’m in the media and I’ve written books, I have perceived credibility anyway, but even if I take a look at say a SPAA (SMSF Professionals’ Association of Australia) accreditation or the like, most trustees don’t know who that organisation is. As one of the participants in the media, I’m trying to fly the flag for all of the associations because they are advocates for the industry.
How would you rate trustee knowledge right now?
If 100 per cent was perfect knowledge about SMSFs and all things surrounding it, I’d probably put the average trustee at about 40 per cent. I’d suggest they need advice and in particular better advice from their accountant, their adviser or SMSF administrator and that’s the challenge, to be able to upskill them.
If you could change one thing about the sector, what would it be?
I’d introduce better education. To that end I’d probably mandate some form of education for SMSF trustees. I think there should be an education standard established. I’m not one for introducing additional regulations because that tends to strangle industries, but there should be something beyond the trustee declaration so they better understand their roles and responsibilities. They might be able to read a booklet and say they understand and sign a declaration, but they don’t really understand what they’re doing.