Practices that want a comprehensive and sustainable SMSF offering can build scale in a number of ways
I see so many practices, both accounting and financial planning, that have dabbled in self-managed super funds (SMSFs) as a reaction to client needs, but who now want to build a more comprehensive and sustainable offer in this space. To do this successfully, you will need to build scale around your SMSF offering.
The key to success is investing in the right areas to ensure you capitalise on your skills and expertise. Let’s look at all the elements of an SMSF offering. Essentially, these can be broken down into the following three broad areas:
- Advice: advice around establishment of a SMSF, advice on the investments within the fund and advice on the fund itself
- Compliance and administration: managing ongoing transactions and ensuring no compliance breaches (particularly in relation to contributions and withdrawals, preparing minutes, letters etcetera)
- Accounting and audit: preparing the annual accounts and audit.
Appropriate compliance and administration is crucial, and there are an increasing number of outsourcing options available for these and other areas of the SMSF offering. By focusing on the advice side of things, and outsourcing the lower value work, you can build scale without having to employ costly resources in-house so your skills and expertise are put to maximum use.
To build a successful practice, the area I would be investing my time and expertise in is in the advice space. Advising on SMSFs is a specialised area as it involves not only advising the individual, but also the fund itself.
Advice needs to be customised to the client and the fund. This is where the real value-add is for you as an adviser. Let’s look at an example of a 50-year-old male client, who has an SMSF and is considering his insurance needs. His SMSF has a balance of $1 million.
Assessing the client’s insurance requirements requires a deep understanding of their needs and aspirations. The person’s overall position, including investments, life insurance (internal and external to their SMSF), personal relationships and estate planning should all be considered.
Let’s assume the client needs further insurance of $1 million. To determine if this policy should be held within the SMSF or outside it, the adviser needs to understand the dependency status of the beneficiaries. If the client is married his wife will be a tax dependant so, in addition, his death could create a $1.2 million tax deduction to the fund. This could be used to offset contribution and earnings tax for his wife and, more importantly, their children (a potential saving of $180,000). If he is single with his benefits passing to his independent children they will pay an extra $330,000 in tax on the death benefit they receive. All in all, this is a dramatically different result for what seemed like a relatively minor consideration at the time.
For accountants, making the shift from compliance to advice will probably mean that you need to consider licensing. There is a cost involved with licensing and meeting your ongoing compliance obligations, but if you get the model right and can achieve scale through better use of your existing resources, the benefit of licensing will far outweigh any costs involved.
Want to know more about the impacts of licensing on SMSF advice? Attend one of AMP’s SMSF strategy & licensing Roadshows in 30plus locations around the country. For more information, visit http://smsfadvicelimited.com.au/workshopinformation-2/
