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SMSF’SFRIEND OR FOE?

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Financial Independence =

Building MY cashflow

to replace

employment cashflow

to meet

cost of living cashflow

What Do Accountants / Advisers Provide Clients???

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WHAT DOES SMSF MEAN?

• Stuffed

• My

• Super

• Forever

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• Latest update on announced proposed changes to Super

• SPAA Survey

• Why has there been significant growth

• What are Trustees Accountable for

• What are the Administrative Responsibilities

• Pricing Models and Options

• What are the Pitfalls

• What are the Benefits

• WHO should use a SMSF

• WHO should NOT use a SMSF

• HOW do you promote SMSF’s inside your business

What are we going to cover

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Proposed Changes - NOT LAW YET!!!

• Tax Exempt Income Streams – 1/7/2014 Exemption on 1st $100,000.00 per person > $100,000.00 taxed at 15% - Threshold of $100,000.00 will be indexed to CPI and will increase in $10,000.00

increments• SOME TRANSITIONAL arrangements apply – Asset purchased BEFORE 4th April 2013 the new rules ONLY apply to Cap Gains that

accrue after 1 JULY 204• Asset purchased from 5th April 2013 to 30th June 2014 you can apply

the new rules to the entire capital gain or only that part that accrues after 1 July 2014

• Withdrawals – STILL TAX FREE for those aged 60 and OVER

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Proposed Changes – NOT LAW YET !!!!!!

• Concessional Cont Caps Increased for over 50/60’s - $35,000.00 ( Unindexed ) – For those Over 60+ from 1/7/2013 – From 1 July 2014 for those aged 50+

• Refund of Excess Concessional Cont’s – Can be withdrawn from 1/7/2013 Taxed at Marginal Tax Rates + Interest Charge = You will be taxed at the same as if the money was received as salary / wages and had made a Non-Concessional Cont

• Super Income Streams to be “deemed” for Centrelink 1/1/2015 Grandfathering applies for those income streams held by pensioners before 1/1/2015

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SPAA Survey Results ( Source Rice Warner )

• 384 People Surveyed• 81% Tertiary Qualified• $1m+ = 50%+• $500k+ 63%• < $200k 4%• 25% expect $100k in Retirement• 17% Require less than $50k PA• 43% Trustees are NERVOUS about SMSF’s• 42.7% Use a Financial Adviser• 92% Use an Accountant• 91% Use an Auditor

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SPAA Survey

• Key Benefits – CONTROL• 87% - Happy with Performance• 83% - Concerned with Super Changes• 68% Concerned about a Major fall in Markets• Not concerned about leaving benefits to Children

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SPAA Survey Investments

• Retirees lower exposure to Resi and Commercial Properties• Little Annuities Held• Most Respondants would like Govt Bonds• ETF’s = 43%!!!!!!!!!• Real Property

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SPAA Survey ( Advice )

• Younger Trustees seek more professional Advice• Oldies = Internet / Media • 52% Paid a Financial Adviser ( $500 - $2000 )• Strategic Advice -- 25% of plans cost more than $2000• Strategic and Investment Advice – 50% $2000+• < 44% Happy with advice < $500• 76% Happy with Advice > $1000 - $2000• Link between Poor Advice and Poor Experience• 40% Not Happy with Adviser• CHALLENGE = Develop a VALUE PROPOSITION

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SPAA Survey Advice Comments

• Adviser more interested in Product Flog• Advice was too simple• No Contact• Major Firms Conflicted by APL • Advice based on product sale• Trustee felt they knew MORE• 50% + intend to seek advice• Happy Client would pay more (75% + would pay $1000 + )• High Financial Product Awareness• NOT seeking simplified advice

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SPAA Survey Income Requirements

• $30000 – 1.9%• $50000 + - 18.5%• $60000 + - 10.5%• $70000 + - 26.4%• $100000 + 27.2%

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Trustee Responsibilities

• Act Honestly in all fund matters

• Same degree of care, skill and diligence as an ordinary person

• Act in best interest of fund members

• Retain Control over the fund

• Keep Money / Assets separate from other monies and assets

• Develop and Implement Investment Strategy

• Provide access to certain information such as Financial Position of Fund

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Administrative Responsibilities

• Keep Accurate and accessible accounts

• Accounts must detail financial position and transactions ( 5 Years )

• Annual Operating Statement / Financial Statement ( 5 Years )

• Maintain Minutes ( 10 Years )

• Retain copies of all Annual returns (10 Yrs)

• Retain copies of all reports to members (10 Yrs)

• Report Cont’s made to ATO by specified dates each year

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PRICING IN THE SMSF INDUSTRY

• 50+ GROUPS PROVIDING OUTSOURCED ADMIN AND SETUP

• AMP 1ST BIG MOVER IN THIS SPACE• ACCOUNTANTS NOW THE FOCUS OF INSTO’S• PREVIOUS INDUSTRY PRACTICE IS NON FIXED PRICE• VERY HARD FOR MARGIN TO BE CREATED IF WORK

OUTSOURCED• IS THIS REALLY PROFITABLE FOR ACCOUNTANTS???• WWW.THESMSFREVIEW.COM.AU

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SMSF Industry Pricing

Name Summary Set Up Annual Admin

Absolute Super Set Up / Ongoing $770 $2475 ( 20 Sec’s )

Catalyst Flat Fee $825 / $1375 $1320 Yrly / $1980 Monthly Inc GST + Audit

Cavendish Set Up / Ongoing $695 $1695 / $1995 + $455 Audit Extra for Pensions ( Platform )

Compli Set up / Ongoing $550 $1980 + $550 Audit ( Standard Fund)

Contract Accounting

Caters for LOW Transactions

$560 / $1325 <50 = $90050 – 100 = $1500

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SMSF Pricing

Name Summary Set Up Admin

Discount Super Set Up / Ongoing FREE if you pay $250 Deposit for Admin

Sliding Scale based on No. of members and Transactions

DIXONS Set Up / Ongoing $990 1% of Fund up to $4990

Heffron Set Up / Ongoing $715 / $1430 $1980 / $3080

JUST Super Set Up / Ongoing $440 $1100 / $1650

Super Concepts Set Up / Ongoing $473 $1390 / $3960 1/4ly+ Transactions Volume

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PRICING IN THE SMSF INDUSTRY

•Pressure on Pricing is COMING!!!!!!•Expect Competition Consolidation to continue•Some clients get negative surprises around fees

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Potential Pitfalls of SMSF’s for Clients

• Personal Use of Funds / Fund Assets• Placing Business Assets into Super• Estate Planning – Who will be Trustee after YOU die• No Super Complaints Tribunal• Onerous Penalties for non – compliance• No Diversity• High Costs for Small Balances• Loss of focus of Trustees

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PITFALLS OF SMSF’S FOR ACCT’S / ADVISERS

• Clients providing up to date and accurate information• Can be time consuming and do you really cover costs• Leaves you open for COMPLAINTS if they get it wrong• Grey area of Investment Advices• Licensing Regime issues

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Advantages of SMSF’s for Clients

• Means to hold broader range of Assets ( Business Assets )• Ability to buy and sell quickly• Potential cut to costs• Avoid Admin hassles of Large Funds• Manage Tax Positions• Buy Assets you cannot otherwise afford• Flexible Estate Planning• Transition from Accumulation to Pension

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Advantages of SMSF’s for Acct’s / Advisers

• Client Entanglement Increases• Accounting Work is COMPLEX thus needs YOU• Provides insights to all Clients Investments • Helps Position YOU as pivotal to the client• Growth AREA = Client Demand

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WHO SHOULD USE A SMSF

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Who should AVOID SMSF’s

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Where are the Opportunities

• Insurance inside SMSF’s• Replicate what approaches Industry Funds are taking• Lifestyle Investment Approach• Model Portfolio’s• Create a free ASSESSEMENT on Appropriateness of SMSF’s• Winding up of SMSF’s• EDUCATING CLIENTS• GROWING YOUR DATA BASE = INCREASED VALUE!!!!!!!!!!!

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3 ways to differentiate your business1. Greater specialist knowledge / expertise effectively

embedded into products and services being offered2. Closer and deeper client relationships3. Greater knowledge transfer, resulting in enhanced

client decision-making and business capabilities

Differentiated

• Value driven

• Knowledge driven

• Relationship based

• Low client mobility

Commoditised

• Price and cost driven

• Technology driven

• Easily substituted

• High client mobility

You do want to be differentiated

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You get what you focus on

• Vision• Planning

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• Detail • Problem (focus on a problem not a problem focus)• Drama

Above the line

Below the line

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