I’ve been covering the SMSF sector since 2008 and in that time have always said it is the biggest success story of Australia’s compulsory superannuation system since its introduction in 1993.
While we are still to achieve a definitive objective for the country’s retirement savings system, the SMSF sector has kicked so many of the goals the majority of the superannuation industry is, in a lot of ways, still scratching its head about.
For a start, there is no other super segment that has the level of engagement SMSF members show. And this isn’t necessarily a given just because the nature of this type of fund would suggest member engagement would be high. If the wrong people in the main were becoming SMSF trustees, they could employ a set-and-forget mindset that would be unengaged and disastrous.
And while not all SMSF trustees receive financial advice, the majority of practitioners servicing this space have long been focused on strategy rather than product recommendations – a phenomenon shown by the recent financial services royal commission to be the most desirable outcome for consumers, but far from being achieved in the general advice industry.
All this while copping continual criticism from various quarters, but particularly some disingenuous government agencies that seem to be captivated by the information being fed to them by the Industry funds.
Now critics of mine might suggest I’ve been seduced by SMSFs and am exhibiting bias because I’ve been immersed in the industry for so long, however, other voices, with no self-interest to do so, have now also expressed similar sentiment about the sector.
To this end, New South Wales Liberal Senator Andrew Bragg earlier this month praised SMSFs as having “done really well” with no systemic problems needing to be addressed, unlike the large public offer funds.
Further, Bragg commended the fact most SMSFs are made up of joint accounts consisting of a husband and wife because this characteristic helps lower the fees the fund incurs. This is certainly in contrast to other pieces of commentary or analyses that are forever bagging SMSFs for their extremely high cost structures.
Consulting, research and actuarial firm Rice Warner was also complimentary about SMSFs, in particular the way the sector is addressing income solutions for retirees. This issue has been one public offer funds are continuing to grapple with as more of their members experience the shift from accumulation to pension phase.
Government intervention to implement a mandatory requirement for trustees of public offer super funds to offer retirement income products for their members continues to be discussed, such is the magnitude of this issue.
But according to Rice Warner, SMSFs are more versed to deal with this predicament again due to the fact 85 per cent of them consist of husband and wife members. This structure means a couple’s super accounts are automatically linked, creating a stronger position to formulate effective retirement income strategies.
So if I’m not wrong, it looks as if more people are coming around to recognise the success of SMSFs and with any luck this sentiment will only get stronger because it is reality.