MLC has been in the SMSF space for more than 10 years and now counts more than 2,100 SMSFs as clients, with over $2 billion in funds under management. The ‘newness’, for want of a better word, is in the embedded technology, dubbed ‘n-link’, which bolts on robust compliance software. It’s the compliance ‘nightmare’ that MLC’s Wappett says is being addressed in the new full-service wrap. “We’ve increased our investment menu and brought our prices down by investing in technology,” he says. “Scale is a big issue in this part of the industry. Compliance is very labour-intensive if you don’t invest in technology. “A lot of providers are doing the portfolios for SMSFs, but MLC has put the time and money into the compliance issues. These are the stings in the tail for SMSFs: clients are responsible as trustees, and use advisers for administration – and this admin can knock around an adviser’s efficiency.” “The SMSF sector is a very attractive segment, but if you do it badly, it’s a nightmare,” says Wappett. He adds that MLC has worked closely with the Australian Tax Office (ATO), and says the wealth manager’s 2,100 SMSF client base is a very solid foundation upon which it can allay ATO concerns about compliance.
Ben Harrop, AMP Capital Investors’ head of retail distribution, says platforms must now offer more choice and accountability to the SMSF market, which has recently been the fastest growing part of the superannuation pie. He sees the growth of SMSFs as a natural evolution of the super industry and one which is not a threat. Simultaneously, however, he says its growth could be limited by the Federal Government’s reiningin of accountants giving advice on SMSFs, with this possibly leading to a convergence of financial planners and accountants. “The Federal Government’s constraints on accountants may slow the growth of the SMSF sector for a while, and so accountants may partner with advisers, leading to some convergence,” he says.
“But at the same time, the next five years is critical because of the growth of super contributions due to the super guarantee.” In the wake of the financial crisis, Harrop has observed that demand for good advice is rising. “It might cost people $2,000 to setup an SMSF, and then another $2,000 a year for audits. They’re now seeing that it’s then worth paying for good advice.” Acknowledging the conflict of interest that AMP’s in-house advisers face, Harrop says “the days of pushing in-house products are long gone. The investors won’t tolerate it – the product has to stack up. This shows that the market has matured”. Harrop disputes the popular ‘cash-myth’: that SMSFs are overwhelmingly just vehicles for term deposits. “There’s still a place for managed funds,” he says, “and they can co-exist happily with SMSFs.” He says AMP Capital is refining its existing products and offering more capabilities. For example, fixed-interest funds are being smoothed to “ensure certainty of income,” and infrastructure options are now offered on hedged and unhedged bases.
