Still room for advisers in SMSFs

A desire for greater control over investments is the main reason cited for establishing a self-managed superannuation fund (SMSF), although there is still a demand for professional advice, according to a statistical paper released by the Government’s Super System Review.

The paper, entitled ‘A Statistical Summary of Self-Managed Superannuation Funds’, was released ahead of the third phase of the Cooper Review on superannuation structures, which includes SMSFs.

It stated that respondents to a 2008 Australian Taxation Office (ATO) new trustee questionnaire cited control of investments in 86 per cent of responses as a reason for establishing their SMSF, while 46 per cent ranked this as the main reason.

This is supported by research released by CPA Australia, which stated that the dominant reason why people started up a SMSF was to have control over their savings — 39 per cent of respondents to the ‘Self-managed Super Funds Insights’ survey cited this as the main reason.

The Super System Review paper stated that greater flexibility over investment options (64 per cent) and the belief they could perform better than their previous funds (53 per cent) were also cited as reasons for starting up a SMSF.

However, the CPA research highlighted the concern that overall trustee knowledge and understanding of their legal obligations could be improved, although there was a demand for trustee education.

The Super Systems Review paper also noted that trustees could and do utilise a variety of professionals to assist them with their SMSFs, with the 2008 ATO new trustee questionnaire revealing that at establishment, 72 per cent of trustees consulted with a tax agent/accountant and 42 per cent consulted with a financial adviser, while only 3 per cent of trustees said they did not seek any financial advice or support when establishing their fund.

However, the CPA research found that family and friends are one of the biggest influences for taking up a SMSF (44 per cent of respondents) and stated that SMSFs are more likely to be bought than sold.

The Super Systems Review paper stated that around 71 per cent of current SMSFs have individual trustees and not a corporate trustee, while nearly 90 per cent of SMSFs established recently have been established without a corporate trustee.

It also highlighted that the SMSF sector is the largest superannuation sector by number of funds and asset size, and that as at June 30, 2009, there were around 410,000 SMSFs, representing 99 per cent of all superannuation funds, with over $332 billion or 30.9 per cent of total superannuation assets ($1.08 trillion).

“The SMSF sector has reached its leading asset size position in the superannuation industry, surpassing the retail sector in 2009, through rapid growth in recent years, increasing from $132 billion to $332 billion in the five years to June 30, 2009 — an annualised growth rate of 20 per cent,” the paper stated.