Financial advisers who provide SMSF advice have positive expectations about the growth in revenue from this client sector, despite that figure remaining flat in recent years and a decline in the number of funds using an adviser, according to an industry research firm.
The Investment Trends “SMSF Planner Report” found that where a practice provided SMSF advice, the level of revenue derived from that advice was 27 per cent and had been at that figure since 2014. Despite this, SMSF advice firms predicted the level of revenue would rise to 31 per cent by 2024.
The report also found that as a result of COVID-19 market changes, there had been an increase in the number of SMSF trustees who were open to receiving advice and a decline in those who would remain self-directed.
The level of trustees open to advice increased to 56 per cent, compared with 49 per cent in 2020 and 47 per cent in 2019, while self-directed trustees fell to 35 per cent in 2021, from 41 per cent in 2020 and 48 per cent in 2019.
Speaking with selfmanagedsuper, Investment Trends head of research Dr Irene Guiamatsia said an openness to advice did not always translate into an advice relationship.
“Over the past three years there has been a consistent growth of those open to advice compared to self-directed investors,” Guiamatsia said.
“We are talking about a very specific group of people who love control over their investments and so when we look at whether they really want to do everything for themselves, that is declining, but they are not using advisers more than previously and the use of advisers in the past year has declined.
“We think because the way advice is delivered is that it is tailored for trustees who delegate authority to the adviser rather than for collaborative relationships with clients.
“It does seem the whole advice sector is under compression at the margins and the reason SMSF advisers may be expecting better revenue from this client pool is the belief the compliance burden will be eased.”
She pointed out that to generate this increase in revenue around 45 per cent of SMSF advisers had already made changes to their practices.
“Many advisers across the board have digitised their practices quickly and the adoption of technology is not surprising, but SMSF specialists did it to a greater degree than generalists, and during COVID-19 there would have been a need for those with sophisticated clients to be more agile,” she said.
According to Guiamatsia, 43 per cent of SMSF advisers identified compliance and administration as the key challenges in servicing the SMSF sector, as well as concerns about accountants setting up SMSFs where they were unsuitable for clients (39 per cent), even though a relationship with an accountant was identified as a way to boost revenue.
The report found 31 per cent of SMSF planners would increase their referral relationships with accountants to build their client base, which in turn would enhance their value proposition and boost business profits.
“Advisers who identified this as an issue also listed uncertainty around what accountants can advise on, educating trustees about their obligations and clients not being compliant with regulations as concerns, which means for them that some of these things are driving other issues and are regarded as pain points for planners,” Guiamatsia said.