SMSF advisers and accountants have reported an increase in the level of fund establishments they have been involved with and are expecting SMSFs to be a key source of revenue in the next three years, according to a new report from Investment Trends.
The research firm’s 2022 “SMSF Adviser and Accountant Report” found that with SMSF assets rising by 15 per cent to $877 billion in December 2021, financial advisers and accountants reported an increase in providing assistance with SMSF establishments over the past year.
According to the firm, 65 per cent of advisers and 72 per cent of accountants involved in the annual report have provided assistance with an SMSF establishment this year, up from 54 per cent and 68 per cent respectively in 2021.
The rise in establishments is consistent with the behaviour of SMSF trustees over the same period, with a recent report, also compiled by Investment Trends in conjunction with Vanguard, finding the increase in establishments over 2021 was driven by a cohort of younger trustees.
Investment Trends research director Dougal Guild said accountants also reported deriving more than a quarter of their revenue from SMSF clients, with 38 per cent pointing to the adoption of new technology in their practice as a key driver of SMSF business in the past year.
Conversely, SMSF advisers saw a slight decrease in the share of revenue contributed by SMSFs this year at 24 per cent, down from 27 per cent in 2021.
“Accountants remain the main port-of-call for new trustees according to our latest research report. The positive business outlook is consistently shared by most accountants, with nearly half expecting SMSF revenue to increase in the next three years,” Guild said.
“Interestingly, both SMSF advisers and accountants are looking to strengthen relationships with each other this year to enhance their client value proposition for prospective clients.”
The report noted administration and compliance activities were listed by SMSF practitioners as the chief obstacles in servicing the SMSF market by 75 per cent and 42 per cent, respectively, of those surveyed for the report.
Practitioners also said client suitability was a hurdle and client education was an area of concern and more educational content was needed to assist them and their clients in assessing whether they required an SMSF.
“The ability to comprehensively demonstrate a SMSF is in the client’s best interest is a key pain point that advisers felt is holding them back from setting up more SMSFs,” Guild said.
Advisers want to feel better equipped to educate current and prospective clients and are calling for content that can help their clients evaluate their own suitability, the report said.
Despite this, it found financial advisers were positive and welcomed the changes in regulations regarding downsizer contributions, the work test exemption and legacy pensions as having a net positive impact on business value and revenue.
“It’s encouraging to see SMSF advisers are positive about the outlook of business outcomes, despite the impending regulatory changes,” it said.
What’s more interesting to consider is that advisers believe the new measures will alleviate a lot of the operational challenges they currently face – potentially strengthening the appeal of SMSF establishment for clients.”