The five-year evolution: what’s the next frontier for SMSFs?

20 November 2018

SMSF Association Media Release

SMSF Week: Thought Leadership Panel discusses:

  • Impact of new technology on SMSFs
  • The need for more education and advice for SMSFs
  • Regulatory Uncertainty
  • Shifting Australians’ mindset of SMSFs as a whole-of-life and inter-generational wealth tool

The adoption of new technology and more education will be critical for the future of SMSF sector according to an industry expert panel held today as part of SMSF Week.

The thought leadership panel, hosted by the SMSF Association and the Australian Taxation Office (ATO), was part of the inaugural SMSF Week and regulators and included industry leaders from the ATO, the Australian Securities and Investment Commission (ASIC), Investment Trends, SuperConcepts, and OpenInvest.

John Maroney, CEO, SMSF Association led the discussion and highlighted the need for SMSF investors to seek more information, new technology and expert assistance in a climate of regulatory uncertainty.

“There is little point working hard throughout your life to maximise your retirement income through an SMSF, only to put it at risk because you don’t have an appropriate investment strategy or the right advice to manage longevity risk. Seeking expert assistance during all phases of your SMSF journey is important, especially during the transition to retirement and estate planning phases.”

The role of technology in the SMSF sector and superannuation landscape more broadly was a focus of the panel discussion.

James O’Halloran, Deputy Commissioner, Superannuation, Australian Taxation Office said, “It’s important for SMSF investors to accept technology as a useful part of their toolkit. Evolving technology will be able to provide real-time and event based information to SMSFs and lead to better decisions, but technology will never replace human judgement.”

Michael Blomfield, CEO, Investment Trends, said, “Technology will make it more convenient and cheaper to invest in an SMSF and that’s what we hope and expect to see in the future.”

Andrew Varlamos, Co-founder/CEO, OpenInvest, said, “New technology solutions are going to bring top tier investment management capabilities directly to investors, including SMSF trustees, in a user-friendly and engaging way.

“New solutions will provide ready access to diversified, multi-asset class portfolios managed by the word’s best investment managers, enabling trustees to obtain portfolio diversification that is appropriate to their circumstances, thereby providing them with the best chance of meeting their retirement goals.” said Mr Varlamos.

The panel also had a healthy debate around the future of advice within the SMSF sector. Unmet advice needs in the SMSF sector continue, with the ongoing challenge to encourage more SMSFs to leverage the wealth of information available.

Michael Blomfield said, “A lot of SMSFs think advice is too expensive and they don’t know who to trust to get it from. This is a challenge that goes beyond the current trust deficit in the financial services sector and we should be able to overcome it. “

Kate Metz, Acting Senior Executive Leader, ASIC, said, “There is a wealth of information available that is not advice, people can access information and insights on ASIC’s MoneySmart or ATO websites. We have no doubt that we will see more digital advice solutions relevant to SMSFs and we’re already seeing new ideas coming through ASIC’s innovation hub.”

James O’Halloran said, “People need to remember that the decisions you make today will impact you in 10, 20, 30 years-time. You need the right support and advice as early as possible.

“Creating an SMSF is not just an investment decision, there are serious trustee obligations. The seriousness of the decision for your future means it is critical to have advice. Due diligence and well-informed appropriate advice can protect SMSFs and their future, their family and retirement lifestyle.

“We understand that building trust and confidence in both the tax and super system is vital to the future of the SMSF sector,” said Mr O’Halloran.

Graeme Colley, Executive Manager, SMSF Technical and Private Wealth, SuperConcepts, said, “Accountants will continue to play a critical role in helping SMSFs navigate their path. Accountants should be directing investors where to seek advice and educating them on what insights they need.”

Regulatory Uncertainty
The panel also discussed the future of Limited Recourse Borrowing Arrangements (LRBA) and proposed changes to franking credits as examples of regulatory uncertainty for the SMSF sector. The discussion followed the revelation from a new report released this week from the SMSF Association, based on Investment Trends data that regulatory uncertainty is now the top cited challenge in managing an SMSF.

Kate Metz said, “We will be looking closely at one-stop-shops for property investment via SMSFs. We’re concerned that there is little to no discussion about how you use a property investment in retirement. Will it need to be sold and if so what if property market drops?”

Graeme Colley, said, “The majority of SMSFs are being discriminated against with the proposed changes to franking credits removal – we think it’s inequitable.”

Longevity Risk
With an ageing population and a generation of SMSFs maturing the panel also raised longevity risk within Australians’ retirement savings as a major challenge for the industry.

Michael Blomfield said, “There is not enough conversation about the need for liquidity in SMSFs approaching retirement. We have to find a way in a regulatory or policy sense to ensure liquidity sensibility to the way people can protect their retirement savings.”

“We need to look at SMSFs as a whole-of-life and intergenerational investment tool.”

Today’s panel event provided valuable insights into the future challenges and opportunities facing the SMSF sector and Australia’s retirement savings landscape more broadly.

 

About OpenInvest:
SMSF Week is proudly supported by OpenInvest, Australia’s first independent online marketplace designed to enable SMSF trustees to engage with and select an investment management company to help them manage their investment portfolio. OpenInvest empowers investors with knowledge, choice and control, and commits to always use plain language, be transparent, keep fees low and never have a conflict of interest. OpenInvest launched on the first day of SMSF Week, Monday 19 November.