About the Awards. CoreData and Self-Managed Super Magazine would like to congratulate all the winners and finalists for this year s awards:

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2 About the Awards The CoreData Self-Managed Super Fund (SMSF) Service Provider Awards were held on the 4th of September. The awards event was proudly presented by Self Managed Super Magazine. The SMSF Awards are designed to recognise the best service providers as rated by s and SMSF Advising Financial Planners and Accountants. Each category uses a combination of service quality ratings and preference with s and SMSF Advising Accountants and Financial Planners. The finalists and winners were decided using results from CoreData s SMSF Service Provider Study This study captures the feedback of SMSF Trustees together with Financial Planners and Accountants that advise on SMSFs responses were collated in the results and the research was conducted between 14th July and 24th August, CoreData and Self-Managed Super Magazine would like to congratulate all the winners and finalists for this year s awards: Service Category Finalists Australian Shares International Shares Fixed Income Administration BT CommSec Perpetual AMP Capital Bell Potter CommSec ishares Magellan Platinum AMP Capital CommSec JP Morgan FIIG Macquarie PIMCO AMP Capital Colonial First State CommSec AMP SMSF Solutions Cavendish Superannuation Multiport SELF MANAGED SUPER FUND AWARDS 2014

3 About the Awards Service Category Finalists AMP SMSF Solutions Commercial Property Residential Property Loans Investment Platforms Cash and Term Deposits Insurance SMSF Accounting Software/Administration Cavendish Superannuation ESUPERFUND BT Cromwell Macquarie BT Macquarie OnePath NAB St George Westpac AMP Bank CBA NAB Asgard ewrap BT Wrap Macquarie Wrap AMP Flexible Lifetime AMP Flexible Super Colonial FirstChoice Australian Money Market ING DIRECT Macquarie ANZ CBA Macquarie BT OnePath TAL Allianz AMP MLC BGL Class Super IRESS 3

4 SMSF Population: At A Glance 600K 400K Number of SMSFs 294,885 Total SMSF Assets $395,779 Total SMSF Assets ($ Millions) Number of SMSFs Total SMSF Assets $558,553 Number of SMSFs 528, K Asset Allocation 11.6% Other 16.0% Trusts Cash 30.2% 9.5% Other 13.1% Trusts Cash 28.0% 14.4% Property Equity 27.8% 16.0% Property Equity 33.5% Member Age Distribution 19.4% 60.7% 14.4% 5.5% 25.9% 56.2% 12.7% 5.1% Pre-Boomer Baby Boomers Generation X Generation Y Pre-Boomer Baby Boomers Generation X Generation Y Member Income Distribution 6.5% 11.3% 6.0% 75.4% 7.7% 14.4% 7.6% 66.5% High Net Worth Core Affluent Mass Affluent Mass Market High Net Worth Core Affluent Mass Affluent Mass Market Source: ATO Self-managed Super Fund Statistical Report, March 2014 SELF MANAGED SUPER FUND AWARDS 2014

5 SMSF Trends and Outlook SMSFs richer than ever March 2014 marked the first quarter in which the number of self-managed super fund (SMSF) members exceeded one million. There are now 1,000,675 members, accounting for 528,701 SMSFs, with total SMSF assets standing at $558 billion. This makes the SMSF sector a crucial part of the Australian financial services and investment landscape and the fastest growing part of the superannuation sector. In the past five years, the number of SMSFs has grown 33.7% from a total of 375,657 SMSFs and 713,077 members overall in March 2009, and has increased at a much higher growth rate than Australian Prudential Regulation Authority-regulated funds over recent 5 year periods (up to 2012 when the most recent APRA data is available). Growth in SMSFs was most rapid between March 2011 and March Within this period, the number of SMSFs grew by 14.1%, with average yearly growth of 7.1%, compared to most other periods where average yearly growth is roughly 5%. More importantly however, growth in SMSF assets in the past five years (89.4%) has outstripped growth in the number of SMSFs, resulting in higher median and mean assets per member and per SMSF. 30.0% 25.0% 28.0% 25.6% 23.4% In 2012, SMSFs with more than $500,000 in assets made up more than half (51.1%) of all SMSFs, compared to only 29.3% in % 15.0% 15.7% 16.6% 17.6% 16.9% 10.0% 5.0% 0.0% $50k and below 6.7% 10.5% 5.5% $50K to $100K $100K to $200K 11.1% $200K to $500K $500K to $1m 8.5% $1m to $2m 9.0% 2.8% $2m to $5m $5m to $10m 1.5% 0.3% 0.3% 0.1% $10m Additionally, comparing the distribution of SMSFs by asset ranges shows that in 2012, SMSFs with more than $500,000 in assets made up more than half (51.1%) of all SMSFs, compared to only 29.3% in This shift reflects recent findings that the costs of running small SMSFs outweigh the benefits with a 2013 ASIC report finding that SMSFs with balances between $250,000 and $500,000 can only compete with industry and retail 5

6 SMSF Trends and Outlook funds provided they use low cost service providers and administrators. 1 Further, the Murray inquiry found the average fee on an SMSF is only lower than APRA-regulated funds (excluding SAFs) for SMSFs with more than $500,000. These trends coupled with a recent Rice Warner report which showed that the average SMSF outperformed the rest of the superannuation industry in six of the eight years from 2005 to 2012 point to continued growth in the sector and likely intensifying competition among providers trying to service the industry. The greater representation of large SMSFs in the total fund population corresponds with changes in the aggregate investment patterns of SMSFs. Total SMSF investment in listed shares has grown by 133% in five years, accompanied by growth in cash assets of only 75% since Cash makes up around half of the portfolios of SMSFs with less than $50,000 in assets in every year, and this proportion steadily decreases as fund assets increase, while the opposite is true for the allocation to shares. Additionally, debt undertaken by SMSFs is on the rise, with limited recourse borrowing arrangements (LRBAs) having quintupled in the past five years and borrowings more than 12 times higher than in The growth in LRBAs has resulted in an upshot in property investment by SMSFs in recent times, however not without controversy. Recently, concerns about property pushers encouraging people to set up SMSFs purely for property investment reasons via LRBAs have been widespread, culminating in calls for increased regulation of LBRAs and to limit or even do away with borrowing by SMSFs. 2 Legislative challenges looming This controversy means that legislative change might be on the cards for SMSFs which could fundamentally change the SMSF landscape both in terms of assets and membership patterns, although as already observed these are closely linked. This is a concern echoed by SMSF professionals with 45.7% of financial planners and 30.1% of accountants citing legislative changes as one of the challenges they expect to face in servicing SMSF clients, according to Core- Data s 2014 SMSF Professionals Research. These concerns largely centre on keeping up with and handling possible compliance around new and changing legislation. 1 Costs of Operating SMSFs, ASIC, May 2013, accessed at LookupByFileName/cp216-RiceWarner-cost-of-operating-smsfs.pdf/$file/cp216-RiceWarner-cost-ofoperating-smsfs.pdf 2 More regulation needed around LRBAs, Self Managed Super Magazine, 7 July2014, accessed at: Total SMSF investment in listed shares has grown by 133% in five years, accompanied by growth in cash assets of only 75% since SELF MANAGED SUPER FUND AWARDS 2014

7 SMSF Trends and Outlook However, possible legislative changes are not anticipated to significantly impact business growth, with only 3.5% of SMSF professionals expecting their SMSF revenue to decline over the next three years, and close to half (48.8%) expecting their businesses revenue from SMSFs to increase by 25%, in line with the steady growth of the SMSF population over the past five years. However, limits to LRBA s might have an impact on the scope of advice professionals are providing to SMSF trustees, with these arrangements currently second to transition to retirement income streams in topics on which professionals most commonly advise (72.1%). SMSF professionals will also face decisions about improving their advice capabilities and qualifications as SMSF growth is accompanied by the shift towards trustees with greater balances. Compounding this is the steady increase in demand for SMSF services from controllers, a behavioural segment identified and defined by CoreData as those who take pleasure from managing their finances and desire a high level of control, and evidence that SMSF trustees are becoming more financially literate and confident. This means that more sophisticated SMSF trustees will be looking for expertise and specialisation in dealing with professionals, while more complex advice requirements around increasingly diversified portfolios and larger assets (such as non-residential property and overseas property) can also be expected from those seeking more comprehensive services. Trust, specialisation keys to growth To some extent, financial planners are better-placed to overcome these challenges, with 58.9% of those advising or administering SMSFs having obtained specialist SMSF qualifications, as opposed to only 43.7% of accountants. However, 51.7% of accountants who do not currently have any specialist SMSF qualifications are looking to obtain these qualifications in the next three years. Additionally there is a skew in the type of qualifications professionals intend to obtain, with more accountants preferring CA or CPA SMSF Specialist qualifications, and financial planners more commonly looking towards SSA and or SSAud qualification. Additionally, accountants do slightly more professional development hours a year, averaging 25 hours compared to the 22.6 undertaken by financial planners, driven by 44.7% of accountants servicing SMSFs spending over 30 hours per annum on professional development in contrast to only 37.1% of financial planners. Accountants businesses are also more likely to have an SMSF specialist in the business with 56.3% having at least one dedicated staff member working exclusively on SMSFs, and only 27.2% of planners having someone in their firm in a similar role. This is possibly driven by the number of SMSF clients that SMSF profession- More sophisticated SMSF trustees will be looking for expertise and specialisation in dealing with professionals. 51.7% of accountants who do not currently have any specialist SMSF qualifications are looking to obtain these. 7

8 SMSF Trends and Outlook als service. The majority of accountants (69.9%) servicing SMSFs have more than 50 SMSF clients, while the majority of planners (67.8%) have 50 or less SMSF clients, with 40.4% having 20 or fewer. Trust, as with most financial services, remains a major barrier for SMSF members in seeking advice and plays a significant role in the decision around choosing an SMSF professional. Financial planners also face the challenge of existing perceptions that their services are not specialised or technical enough to meet SMSF members needs and suspicions that they are more geared towards pushing products instead of providing technical or client-focused service, as highlighted by the 2013 Russell Investments SPAA Intimate with Self-Managed Superannuation Research. Recognising this, two thirds (65.2%) of financial planners and 50.0% of accountants are looking to offer more strategic advice in the next three years to SMSF clients. Trust, as with most financial services, remains a major barrier for SMSF members in seeking advice. Offering scaled advice may also prove a viable solution for professionals looking to expand their SMSF client base with it playing the dual role of satisfying demand from more sophisticated SMSF trustees looking for limited advice and guidance, as well as acting as a gateway to gain the trust of those who are more skeptical of professional services. SELF MANAGED SUPER FUND AWARDS 2014

9 Snapshot: SMSF Professionals Professionals who advise and administer SMSFs 12.0% Professionals not servicing SMSFs 88.0% Professionals servicing SMSFs Intentions of those not offering SMSF services 33.3% Will offer SMSF advice in the next 5 years 23.2% Don't know 43.5% Will not offer SMSF services in the next 5 years Growth Outlook Strategic advice 40.4% 55.3% Investment advice 19.9% 3.9% Insurance advice 9.9% 0.0 SMSF loans 7.9% 5.8% Estate planning 7.3% 9.7% Financial Planners Staff / Resourcing 17.9% 17.5% Competition 13.9% 23.3% Technology 8.6% 6.8% 5.3% 15.5% Challenges Keeping up to date with legislative change 30.1% Adopting a new business model (e.g. annual to monthly fees) 45.7% Accountants Financial Planners $157,104.5 Average Annual Revenue from SMSFs $392, hrs Offering SMSF Advice only 64.2% 13.6% Offering SMSF Administration only 0.6% 37.9% Offering Both SMSF Advice and Administration 35.1% 48.5% Have Specialist SMSF Qualifications 58.9% 43.7% Average Annual Professional Development 482.4hrs Accountants 16.6yrs Average Experience 19.3yrs Source: CoreData SMSF Professionals Research

10 About CoreData CoreData Research is the Australia-based arm of a broader global specialist financial services research and strategy consultancy. CoreData Research understands the boundaries of research are limitless, with the thirst for new research capabilities driven by customer demand; CoreData Research in recent years has begun a global expansion into America, Africa, Asia and Europe. The Australia division is part of the CoreData Group and has operations in the UK, the United States of America, Brazil, Singapore, South Africa and the Philippines At the centre of CoreData is a highly disciplined and efficient research business which delivers customer, sales and service channel insights to help businesses better understand the market in which they are operating and their relative strengths and weaknesses. Clients benefit from a dual offering of business-to-business and business-to-consumer research and consulting services. The CoreData team has the skills and experience to identify patterns that are emerging and translate this into opportunities for our clients. We are experts at gathering, disseminating and presenting information through face-to-face meetings and written reports. The CoreData team has a depth of industry experience that reflects a rich understanding of the changing environment facing firms operating in the financial services sector. SELF MANAGED SUPER FUND AWARDS 2014

11 About Benchmark Media Benchmark Media was started in 2012 and is committed to publishing high quality editorial content for the financial service sector. In 2013 Benchmark Media launched a print title and three online titles selfmanagedsuper, financialobserver, and theinstoreport. selfmanagedsuper is the definitive publication covering Australia s SMSF sector. It uniquely offers both online and print publications tailored separately for SMSF professionals and individual trustees participating in the fastest growing and largest sector of the superannuation industry. As such, it is a must read for those wanting to stay informed about the latest news, regulatory developments, technical strategies, investments, compliance, legal and administration issues concerning SMSFs. Launched in early 2013, is dedicated to providing daily news and other in depth content for financial planners, accountants, fund managers, superannuation professionals and wealth managers. An experienced financial services editorial team delivers quality, relevant and reliable industry news direct to you. Launched in is aimed at investment professionals working at the wholesale level including super fund trustees, custodians, asset consultants, implemented consultants, insurance professionals and technology experts. Readers can access the latest news as well as regular feature articles and industry insights from peers, as well as industry debates. 11

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