The SMSF sector must have been well behaved in 2014. Why? Because the report handed down by the Parliamentary Joint Committee (PJC) on Corporations and Financial Services on the cusp of Christmas Eve was the best present our sector could have hoped for.
Like a bulging Christmas stocking, the report, “Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry”, was filled with common-sense proposals that will help build the foundations for the emerging class of SMSF professionals who are far removed from their accounting and financial planning origins.
That the report, in its recommendation on educational standards, recognised SMSF advice as a separate and specialist area was pleasing in itself; it can only enhance the status of the SMSF profession when it is acknowledged in reports of this substance.
In SPAA’s submission to the PJC, we emphasised the importance of the need for specialist education by those providing advice on SMSFs, as well as meeting core competencies for financial advice, so to see this emerge as one of the report’s key recommendations was a positive.
Indeed, on many issues there was common ground between what our association has long been advocating and what the report recommended. Let me cite three other examples.
Lifting the standard of education for financial advice to an Australian qualifications framework level seven (bachelor degree).
Rebadging ‘general advice’ as ‘product sales information’ and not ‘financial advice’. As we said in our submission, these titles will give consumers a clearer understanding of the type of advice they are receiving and how it meets their needs.
Its six proposals about the register of financial planners. But my focus is the report’s recognition of SMSF advice as a separate and specialist area because in saying this it dovetails with what has been happening on the ground for some considerable time with the emergence and recognition of the SMSF professional and the SMSF profession.
This was confirmed in the “2014 SMSF Service Model Report”, the third in a series jointly published by SPAA and Macquarie.
This detailed report highlighted the existence of a primary profession focusing on SMSF advice, where the traditional professions servicing SMSFs, such as accounting and financial advice, had previously become the way for people to start their career.
Up to this point, accounting and financial services have been the services most closely associated with SMSFs, but that has now widened to include a whole range of services, such as general insurance, estate planning and legal advice, administration, and mortgage and broking advice for people working in the SMSF profession.
This diversification of professionals servicing the industry is driving new business opportunities. That’s the upside. The challenge for businesses is that they are having to provide a more complete and competent service to their SMSF clients to remain relevant.
That this is happening in the SMSF sector should surprise no one. There are now more than 1 million SMSF trustees and members and more than half a million funds. Funds under management now exceed $560 billion.
Financial institutions of all shapes and sizes are determining how they can tap this market. And governments are examining how to open more investment opportunities for this growing pool of funds.
A sector of this size, that the Financial System Inquiry found to be working efficiently, must inevitably drive commercial opportunities, as the SPAA-Macquarie report found. More than three-quarters of the businesses (85 per cent) want to take on new partners or acquire a new business or client base; only 15 per cent plan to sell all or part of their business.
Business confidence is another yardstick to measure how these specialist SMSF firms see their futures. Slightly more than 80 per cent of respondents to the report said they not only felt positive about the outlook for their businesses, but the future of the SMSF services industry, so much so that firms are looking to integrate new service offerings.
The foundation stone on which all these business opportunities have to be built is the highly qualified SMSF professional who is continually upgrading their skills to meet the growing demands of the client.
This is what the PJC report recognises and what SPAA, as the peak association representing the SMSF sector, has been advocating for the past 12 years.
