One on one with…Simon Makeham

Simon Makeham

Makeham Financial Services principal Simon Makeham has strengthened his servicing of the SMSF sector in recent years by also becoming a director of ASMA. He shares his thoughts with Darin Tyson-Chan about the areas in which he would like to see better representation for SMSF members.

How did your involvement in the SMSF sector come about?

I was originally a public tax accountant and was assessing where accounting, tax and superannuation were going and I came to the conclusion there was no way any individual could competently be across all of these different areas. So I had to make a decision as to where I wanted to specialise and what I wanted to do. I recognised superannuation was where the biggest future lay; I thought it was likely to become most people’s principal asset outside of their principal place of residence. As a result I decided, in 2003, to keep the SMSF component of my accounting practice and sell off the rest, and from there we’ve continued to build what I believe is one of Australia’s first truly specialised SMSF practices.

Why did you decide to specialise in SMSFs rather than the broader superannuation market?

I could see the attitude within my existing client base was to have more control over their own investments, assets and their own future. This was to do with all aspects of their financial affairs, not just super. So in line with this sentiment I decided SMSFs was the area to concentrate on. Also, I actually believe the SMSF environment is still the best superannuation environment any person can be in. I mean, there are some limits to that statement in terms of practical asset balances, but there comes a point where people should consider having an SMSF because of the flexibility associated with them.

What services do you provide to your clients?

We offer them the full service. Administration is part of that. We also offer investment advice and guidance. Within our structure we have portfolio reporting tools that all of our clients can access. So in a sense we offer our own wrap environment, just not at the same cost most people are paying for a wrap environment. We’re significantly cheaper and for us those items are just tools that allow us to work with clients to really add value to the advice process. So we’re a comprehensive advisory business.

You’re a director of the Australian SMSF Members Association (ASMA). How did that opportunity arise?

ASMA is something we’d talked about for about seven or eight years as a small group of professional people working in the SMSF area. In particular, it was people like myself and some of my colleagues who really deal with face-to-face SMSF clients. What we’ve seen for a long time is the need for somebody to actually voice the concerns and issues or just to be there for SMSF members as opposed to the professionals working in the industry. Professional associations do not provide the right service to a member. So we’ve seen it for a long time and we talked about getting the body going, and it was a case of actually finding the time to get ourselves organised to sit down and say let’s get this association up and running and that’s what we’ve done now to be the voice of the SMSF members.

What are the areas of member representation professional bodies have not looked after in the past?

There are very simple examples of where SMSF members and in fact members of superannuation in general have not been fairly heard. The winding back of the concessional contributions is one. This action has particularly impacted on a lot of self-employed people and, to a further extent, those people who have been employed all of their lives and have finally got their children off their hands and have not had a great opportunity to look towards contributing to their super. They now want to accumulate more superannuation, but the contributions caps now restrict them from the amount of superannuation they’d like to build up. They haven’t had the benefit of the superannuation guarantee along the way so they really need to continue to save. This is the sort of issue we see no one actually speak out about in opposition for members and we really needed to make sure we had the voice there to start to deal with these issues.

In the two-year life of the organisation, how large has the membership become?

ASMA has roughly around 2500 members, but after our recent roadshow we’re expecting a significant increase in the membership because there was such enthusiasm among the delegates, and pretty much every member that attended left the function committing to introducing at least one new person to the association.

And what’s the feedback from members been like regarding ASMA’s progress?

The concept of what we’re doing has been very much embraced by our members. It’s early days for ASMA as well and I think that some of our members may have had expectations that we would have achieved a lot more by now. All I can say though is that we will achieve the representative voice and that’s what we’re working towards, but sometimes, like any new business, it takes time and there have been some hurdles to get over. Generally speaking I think our members are very happy and I think they really have embraced what we are doing and I believe they’ll continue to support us in the future.

Is there any specific area you’d like to begin to make a difference in for SMSF members? Providing better representation at AGMs perhaps?

I think the important thing we need to focus on is to be sure we take the views of our members to the powers that be and not the views of a minority group of people within our membership base. So the idea of representing a view as a collective group at shareholder meetings and things like that, yes that is something you can conceptualise and something we may be able to facilitate somewhere down the track, but I would like to believe at the moment it’s not our real scope. The scope of what we’re about is looking after the interest of SMSF members. For example, there is a proposed change to the taxation arrangements within superannuation generally, but it has also been mooted there may be some changes that will be specifically made for SMSFs. To me that would be discriminatory anyway and I just can’t believe that anybody would suggest the government could impose an additional tax on an SMSF. These are the sorts of issues ASMA needs to focus on and they’re the important ones to be addressed and that’s where becoming a voice for members is important.

What’s ASMA’s view on the need for further trustee education?

Generally speaking I think SMSF trustees are becoming more clued up and they have a better understanding of what is expected of them and a better understanding of what they’re doing because they’re engaged. So education is important to them. There seems to be this air out there at the moment and a message that has been pushed, and I think it must be coming from other areas of the superannuation environment, that somehow people who are in an SMSF are looking to do the wrong thing or that the regulations or controls around SMSFs aren’t as strong as they might be in an APRA (Australian Prudential Regulation Authority)-regulated fund. Well that’s just ridiculous. We have the ATO that has a very strong SMSF contingent and these guys know what they’re doing and they’re easy to work with. As far as SMSF members and trustees go, I would say 95 per cent of them want to do the right thing. So they are seeking education, but I think they’d stop short of agreeing to sit an exam imposed on them by the Australian Securities and Investments Commission if they wanted to invest in a particular type of product. That takes away an individual’s choice to be able to make their own investment decisions. I think the regulation we have today is more than adequate. I don’t see too many compliance breaches in all the funds that come across my table, and in fact I see trustees of SMSFs with an appetite for education through their own choice and not education that has been imposed upon them. So ASMA will facilitate those types of education services to its members most definitely and if that’s what the members want, that’s what we will deliver.

What’s the most significant change you’ve seen in the SMSF sector?

What I’ve really witnessed is this continuous growth in the SMSF space and it continues to grow today despite all of the efforts of other areas of the superannuation and investment industry to detract from the flow of funds that go toward SMSFs. I suppose it’s because the individual members of these funds, like a lot of the members of other superannuation funds, have lost confidence in a lot of fund managers out there and the ability of specialist investment managers to manage their investments properly. So the biggest change I’ve seen is the loss of confidence in the larger organisations to deliver to them what they want and as a result of that there is a continuous drive toward the growth of the SMSF market.

What would be the one thing you’d change about the SMSF space?

I’d take away the limits imposed on people who are trying to accumulate for their retirement to become self-funded retirees. It’s just a ridiculous notion to have policy that discourages people from contributing to a superannuation environment to provide for themselves in the future. Surely the cost to any government in the future of having to fund people who have not been able to provide for their own retirement has got to be greater than the cost forgone now to provide some incentives for people to continue to contribute towards superannuation.

Over the coming year what do you see as the biggest challenge for the SMSF sector?

Our current government and its attitude toward the SMSF sector. I’m still yet to hear [Financial Services and Superannuation] Minister [Bill] Shorten actually publicly state that he is in full support of the SMSF environment as we know it today.

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