Master trusts to absorb DIY
More than half of all DIY superannuation funds will eventually be rolled into master trusts in the next few years, a Melbourne fund manager has predicted.
More than half of all DIY superannuation funds will eventually be rolled into master trusts in the next few years, a Melbourne fund manager has predicted.
SMF Funds Management managing director Christopher Kelaher says the growing administration burden, and greater choice offerings of master trusts, will make people roll over their fund.
“The DIY market is like the family trusts of a decade ago,” he says. “Suddenly people have realised that compliance costs are too high and there is no benefit, compared to master trusts.”
“Unless a person holds exotic investments or wants their office or warehouse in their fund, the DIY option now makes little sense.”
There are in excess of 350,000 DIY funds in Australia and Kelaher believes a fund has to be worth between $300-400,000 to be economically viable.
This is becoming important with the additional paperwork created if the fund registers for GST.
Kelaher says many accountants will be too busy dealing with GST and their business clients to have time to deal with a DIY fund.
He also predicts that if the beneficaries of the DIY fund become full-time employees, because they have lost their consultant status under the new tax regime, they will be making the statutory contribution, rendering a DIY fund superfluous.
“A master trust can offer the beneficiary all the same benefits their fund is offering, but at an economic rate due to the bulk booking of services,” Kelaher says.
SMF is offering 150 direct-share investments through its fund in addition to the usual selection of managed trusts. It also has nine loyalty-card equity investments on offer and Kelaher sees more services being offered in the future, including private health cover.
SMF is hoping to win a slice of this DIY roll-over business, but Kelaher says there are still plenty of opportunities in the corporate sector. Many trustees are finding running a superannuation fund is becoming more onerous, so they are switching to master trusts.
He believes in the next five to 10 years, only the very large corporate funds will remain, with most of the small to medium-sized corporate funds disappearing into master trusts.
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