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ISCOVER
Self-managed funds continued a trend of consolidation in 2013, with brokers on the cusp of a revolution in diversified business
When the Reserve Bank of Australia and AP issued public warnings about investing in property through an SMSF, they may not have realised the impact they would have.
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According to Google, a significant spike in searches about SMSFs occurred in 2013 as more and more consumers began to wonder whether self-managing might be right for t hem.
Halfway through the year, there were well over half a million active funds, with total assets amounting to $496 billion, up 15.8 per cent on the year before.
Of that almost $500 billion, about 14.7 per cent is tied up in property – roughly $72.9 billion.
In the spotlight
However – and despite the surge in interest over the past 12 months – growth in the superannuation industry has actually remained steady since 2007, averaging approximately 6.5 per cent each year.
“It’s the same as it always has been,” says Adam Gee, head of consulting at Super Ratings.
According to Mr Gee, high net worth individuals find it more cost effective to run their own funds rather than pay fees to “At the moment, we’re seeing about 2,500 funds a month set up – that’s been constant right through,” he says.
Stories about SMSFs frequently appear in the mainstream media, points out Cliven Kirkpatrick, general manager of mortgage broking at St George Bank.
“SMSF lending has been prevalent in the media over the last 12 months, and given the growing spotlight, we expect greater focus from financial institutions on internal policies and procedures to ensure responsible lending as growth across SMSF lending is not expected to slow down,” says Mr Kirkpatrick.
No surprise then that the RBA, AP and some other regulatory bodies have kept an even closer watch on the sector in the past year.
Following the trend
With SMSF loan products now in hot demand, brokers are on the cusp of an industry-wide shift to embracing a diversified business model that includes SMSFs.
According to The Adviser's 2013 Elite Business Writers ranking, 28 per cent of top brokers claim to have added SMSF loans to their revenue stream in the past financial year, taking the proportion of brokers on the list who offer these products to 60 per cent.
“SMSF lending presents an opportunity for brokers to educate their existing client base and new clients about borrowing to fund new investment opportunities,” says general manager of Liberty, John Mohnache .
“Many clients may not be aware of the ability to acquire property using borrowed funds via their SMSF, and brokers can play an important role in providing relevant background and credit product information.”
A growing number of enquiries in the financial planning and advice sectors has also made referral partners vital for brokers’ lead generation activities in 2013, according to Mr Kirkpatrick.
“There is a lot of business out there for the taking if a broker positions themselves well,” he says.
“The potential for them to grow their business and build new relationships and networks through financial planners and accountants is vast.”
But as always, brokers need to remain vigilant and ensure that any advice they provide clients around SMSFs is strictly product-related.
“Brokers have got some pretty tight restrictions, and they’ve definitely got to be careful around this issue,” says Gadens Lawyers’ Jon Denovan.
