September 24, 2024 • 10 mins
The self managed super fund sector in Australia is hitting new records, with more people choosing to start their own SMSF.
Tim Steele, CEO of Class, talks to Sean Aylmer about the Annual Benchmark Report from Class, revealing who's starting SMSFs, why they're doing it, and how much money is in their funds.
This is general information only and you should seek professional advice before making investment decisions.
Find out more: https://fearandgreed.com.au/
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome to the Fear and Greed Business Interview. I'm Sean Almer.
The self managed super fund sector in Australia has hit
a new record with more than six hundred and twenty
five thousand self managed super funds now registered. There's been
a strong rebound since COVID, with gen X leading the
way in the SMSF world. There are some These are
some of the findings from the annual benchmark report from
(00:27):
Class And, an Australian accounting technology company with a focus
on smsfs. As always, this is general information only and
you should seek professional advice before making investment decisions. She'll
talk to someone also if you want to get into
an SMSF fund yourself. Tim Steele is the CEO of
Class Team. Welcome back to Fear and.
Speaker 2 (00:44):
Greed, Sean, Thank you having lovely to be back.
Speaker 1 (00:47):
So the sector is growing. What's behind that?
Speaker 3 (00:50):
Oh, I think it's reflective of people's continued interest in
taking control of their super and wanting to at least
take a more active role. It's supporting long term retirement
outcomes and smsfs continue to be a really attractive vehicle
for doing that. We know technology has played a role,
so there are opportunity for people to perhaps access SMSF fund,
establish it, and or manage it perhaps more cost effectively,
(01:14):
and so we think that's driving the overall growth.
Speaker 1 (01:16):
We haven't actually done much on DII funds for quite
a while. So just really quickly, Tim, give us the
pros and cons of an SMSF and the sort of people.
And I appreciate that your role in life, you'd have
many many pros and very few cons. But now give
us both sides of the coin and the people who
were most suited to it.
Speaker 3 (01:36):
I can rely on our data, Sean, I think you
can tell us who's actually establishing funds.
Speaker 2 (01:40):
So that's interesting.
Speaker 3 (01:41):
And you said in your introductory remarks that it's been
driven by gen X. That is true based on our
data and that and that and millennials. We've got just
over eighty percent of establishments for that sector, and the
average balance on establishment this year for the first time,
based on our data, exceeded five hundred thousand, five hundred
and thirty seven thousand for at differ.
Speaker 2 (02:00):
So when we think about who.
Speaker 3 (02:01):
Is establishing it, it's typically the gen X, but also
millennials almost twenty eight percent, and they're established it with
over half a million dollars of superannuation assets when they join,
which I think gives you a sense of the point
at which perhaps either they take much greater interest in
their super and therefore in SMSF might make more sense,
or they reach a stage where they've got a certain
(02:22):
scale that actually the economics of an SMSF may make
more sense as well, so the pros and cons it
depends for us. Really, we don't want just everyone piling
into smsfs. It's like everything. We encourage people to get
advice with big believers in the benefits of financial advice,
and so ultimately financial advisors we're making recommendations to their
clients where they think it makes sense. And it's not
(02:43):
just driven by the amount of money you've got in
your superannuation fund. I think it's determined by your own
personal preferences, type of assets you want to hold, the
role that you want to have in contributing to helping
shape your super. But it is a very flexible solution
that can grow with you over time as you become
perhaps you need to become more complex, and it does
give you the control that I think many Australians see
(03:06):
certainly it can be at different stages of life.
Speaker 2 (03:08):
It can be a little bit.
Speaker 3 (03:09):
More complicated for people where you're actually if you are
doing it yourselves, and so they may come a point
in time we'd prefer to delegate or have actually an
Apple regulated fund take care of that for you. But
we are seeking people hold smsfs longer, and certainly when
we look at our non concessional contributions, we've seen that
at a much older age grip as well.
Speaker 1 (03:29):
I mean I had an SMSF for a while. My
work kind of made me convinced me to not do
it anymore because I talk about all sorts of companies
and bonds and things like that, and I actually preferred
be at arm's length. But the one thing about it
which I learned from the experience was the need to
be continually across it. It's not a set and forget product,
is it.
Speaker 2 (03:48):
No, it's not quite.
Speaker 3 (03:49):
Frankly, we don't think superannuation should be for anyone given
me importance of what it might mean for the long term,
long term timement outcomes. But you are right that I
think typically people who choose to have an SMSF do
want to be more engaged in the process, and we
see that in some of our data, and when we
think about things like account the pension establishment. We look
(04:10):
at our data and ninety three percent of members on
Class who are over the age of sixty five have
actually established a pension and that compares, I think, very
favorably to APPA related funds where it's just under fifty
percent at forty nine percent. And so it's clear to
us from that one data point that certainly SMSEF trustes
are typically far more engaged with their superannuation, which we
(04:32):
do think is a good thing, irrespective whether it's an
approfund or.
Speaker 2 (04:35):
An s SEF.
Speaker 1 (04:37):
Stay with me. Tim will be back in a minute.
I'm speaking to Class CEO Tim Steele to the annual
benchmark report. One of the things that came out was
changes to tax liabilities and how that's affecting members. Can
you explain that.
Speaker 2 (04:58):
Yes, so I should be really clear.
Speaker 3 (04:59):
Sean proposed legislation, So it's quite controversial legislation that's yet
to actually pass the Senate. We think it's going back
in October, but it's it's Division two nine six, and
effectively there's a cap at over three million dollars at
which you will pay a great tax on assets above
that amount, and so we've done some analysis for the
first time looking at what that impact might be to
(05:21):
class members. And look, it probably surprised us on the
significance of the potential tax liability on average for the
affected members. And there were sixteen thousand, or just sixteen
and a half thousand members on class data that would be
affected at an average tax liability of just under fifty
thousand dollars, so it was forty nine thousand, nine hundred
and twenty five dollars.
Speaker 2 (05:40):
The challenge then again became, well.
Speaker 3 (05:42):
How many of those are going to be able to
afford to pay that tax without having to sell assets,
and we found that there were five percent who are
going to struggle to pay that tax bill.
Speaker 1 (05:51):
Well, it's still a lot of people who have that
much in superannuation.
Speaker 2 (05:54):
Though. It is a lot of people have that much money.
Speaker 3 (05:58):
And I think, and that's probably why from a political perspective,
it's seemed to be sort of fair game if you like,
I don't think anyone's going to be crying or for
those people who've got over three million dollars in their
in their super our view, and I have to say,
you know, is that it is a really interesting potential
legislation that I think for the first time is proposing
to tax unrealized games, which I think creates a really
(06:20):
interesting and potentially problematic precedent for tax law in Australia.
And it means that people may not have had the
benefit of the obviously realizing that asset and therefore may
not have the cash reserves available to actually pay the
taxes liable.
Speaker 1 (06:33):
Okay, what about asset allocation? What are you saying there?
We hear lots about ETF and you know, we speak
to people talking about exchange traded funds, are self managed
super fund participants participating in that whole ETF popularism at
the moment.
Speaker 3 (06:51):
Yeah, not surprising, I think for the reasons that you'd
be familiar with, Sean that you know, there's are transparent,
low cost, diversified elements of ETFs that make them really
attractive to the right clients at.
Speaker 2 (07:01):
Least for a proportion of your portfolio.
Speaker 3 (07:03):
And so our data shows that now just under thirty
three percent of all smsfs on class actually hold smsfs,
and they are in aggregate about five point four percent
of the total assets on class, and we have you
know circa three hundred and three hundred and twenty five
billion dollars that's administered on class and so it's a
(07:25):
reasonable chunk of change that is flowing into ETFs.
Speaker 1 (07:29):
Okay, another thing in the report, it talks about members
not receiving advice. We're feeling great, are great believes in advice,
But if you're you've got half a million dollars, you've
probably be pretty good not to receive advice. I suspect.
Speaker 2 (07:43):
Oh.
Speaker 3 (07:43):
Look, we were also big believers in advice, Sean, and
that number does concern us, and it's not surprising for
our data, Just under fifty thousand members have received advice
the last three years, so that number has been fairly
stagnant as the number of smsfs have grown. As a
percentage there for the number of people receiving advice is
gone has gone down, and we track that data by
(08:04):
looking at the number of funds that actually have an
advice fee deducted from their account. Look, we still believe
there's an opportunity for more Australians to get advice, and
we're hopeful that the Quality of Advice Review Tranch two
as that's released, will at least create the capacity for
more Australians to get advice cop effectively irrespective of whether
you have an smsre for or an approfund.
Speaker 1 (08:27):
So how do we get people more enthusiastic about getting advice?
Speaker 3 (08:31):
Well, I think this is part of that. I think
really what's driving some of the regulatory reform that's been proposed,
and I touched on quality of advice review, which is
all about the accessibility and affordability of advice, removing red
tape and some of the complexities that make advice more
expensive for advisors to comply with the legislation. And I
think the fact that we're going to have a different
(08:52):
tier of advisor if TRUNCH two is passed, then that
will at least enable people through their super fund to
be able to get access to I mean, we'd love
to see quite openly with obvious commercial bias declared Sean,
we'd love to see the accountants exemption for SMSF advice return.
We think that would be a real benefit to ultimately
(09:13):
smsfs and more Australians getting access to advice. But I
really think that that the QAI reforms are an important
step towards seeking to achieve that. And then it's helping
continue to reinforce the value of advice. I think people
have got to take a proactive step to want to
do something about their situation, and either reaching out to
their super fund or their accountant or their advisor can.
Speaker 2 (09:34):
With important steps towards getting the right advice.
Speaker 1 (09:37):
Do you think these self managed super fun sector will
continue to grow? And this, of course is related to
the advice question, because if there are more people doing themselves,
I hope there's more demand for advisors.
Speaker 2 (09:49):
Yeah, we hope so too, Sean.
Speaker 3 (09:50):
I mean, I think just I don't think it's necessarily
perfectly characterization of saying, hey, SMSFS equals DIY. SMSF is
obviously a tax structure which you hold superannuation assets, and
it gets based on our data, twenty seven percent of
those people are actually getting advice today. There may have
been a greater percentage who got advice earlier. We do
believe the s MESSF sector will continue to grow because
(10:13):
we think it's a really attractive, flexible structure that supports
people as there needs to become more complex and so
for that reason, we believe smsfs will continue to be
attractive and we hope people are getting advice where it's
appropriately to do so.
Speaker 1 (10:26):
Tim, thank you for talking to Fear and Greed.
Speaker 2 (10:28):
Thank you for having me Sean.
Speaker 1 (10:29):
Now was Tim Steel, CEO of Class. This is the
Fear and Greed Business Interview. Remember this is general information
only and you should seek professional advice as we've just
been discussing before making investment decisions. Join us every morning
for the full episode of Fear and Greed Daily business
years for people who make their own decisions. I'm Joan Elmer.
Enjoy your day.
Welcome to the Fear and Greed Business Interview. I'm Sean Almer.
The self managed super fund sector in Australia has hit
a new record with more than six hundred and twenty
five thousand self managed super funds now registered. There's been
a strong rebound since COVID, with gen X leading the
way in the SMSF world. There are some These are
some of the findings from the annual benchmark report from
(00:27):
Class And, an Australian accounting technology company with a focus
on smsfs. As always, this is general information only and
you should seek professional advice before making investment decisions. She'll
talk to someone also if you want to get into
an SMSF fund yourself. Tim Steele is the CEO of
Class Team. Welcome back to Fear and.
Speaker 2 (00:44):
Greed, Sean, Thank you having lovely to be back.
Speaker 1 (00:47):
So the sector is growing. What's behind that?
Speaker 3 (00:50):
Oh, I think it's reflective of people's continued interest in
taking control of their super and wanting to at least
take a more active role. It's supporting long term retirement
outcomes and smsfs continue to be a really attractive vehicle
for doing that. We know technology has played a role,
so there are opportunity for people to perhaps access SMSF fund,
establish it, and or manage it perhaps more cost effectively,
(01:14):
and so we think that's driving the overall growth.
Speaker 1 (01:16):
We haven't actually done much on DII funds for quite
a while. So just really quickly, Tim, give us the
pros and cons of an SMSF and the sort of people.
And I appreciate that your role in life, you'd have
many many pros and very few cons. But now give
us both sides of the coin and the people who
were most suited to it.
Speaker 3 (01:36):
I can rely on our data, Sean, I think you
can tell us who's actually establishing funds.
Speaker 2 (01:40):
So that's interesting.
Speaker 3 (01:41):
And you said in your introductory remarks that it's been
driven by gen X. That is true based on our
data and that and that and millennials. We've got just
over eighty percent of establishments for that sector, and the
average balance on establishment this year for the first time,
based on our data, exceeded five hundred thousand, five hundred
and thirty seven thousand for at differ.
Speaker 2 (02:00):
So when we think about who.
Speaker 3 (02:01):
Is establishing it, it's typically the gen X, but also
millennials almost twenty eight percent, and they're established it with
over half a million dollars of superannuation assets when they join,
which I think gives you a sense of the point
at which perhaps either they take much greater interest in
their super and therefore in SMSF might make more sense,
or they reach a stage where they've got a certain
(02:22):
scale that actually the economics of an SMSF may make
more sense as well, so the pros and cons it
depends for us. Really, we don't want just everyone piling
into smsfs. It's like everything. We encourage people to get
advice with big believers in the benefits of financial advice,
and so ultimately financial advisors we're making recommendations to their
clients where they think it makes sense. And it's not
(02:43):
just driven by the amount of money you've got in
your superannuation fund. I think it's determined by your own
personal preferences, type of assets you want to hold, the
role that you want to have in contributing to helping
shape your super. But it is a very flexible solution
that can grow with you over time as you become
perhaps you need to become more complex, and it does
give you the control that I think many Australians see
(03:06):
certainly it can be at different stages of life.
Speaker 2 (03:08):
It can be a little bit.
Speaker 3 (03:09):
More complicated for people where you're actually if you are
doing it yourselves, and so they may come a point
in time we'd prefer to delegate or have actually an
Apple regulated fund take care of that for you. But
we are seeking people hold smsfs longer, and certainly when
we look at our non concessional contributions, we've seen that
at a much older age grip as well.
Speaker 1 (03:29):
I mean I had an SMSF for a while. My
work kind of made me convinced me to not do
it anymore because I talk about all sorts of companies
and bonds and things like that, and I actually preferred
be at arm's length. But the one thing about it
which I learned from the experience was the need to
be continually across it. It's not a set and forget product,
is it.
Speaker 2 (03:48):
No, it's not quite.
Speaker 3 (03:49):
Frankly, we don't think superannuation should be for anyone given
me importance of what it might mean for the long term,
long term timement outcomes. But you are right that I
think typically people who choose to have an SMSF do
want to be more engaged in the process, and we
see that in some of our data, and when we
think about things like account the pension establishment. We look
(04:10):
at our data and ninety three percent of members on
Class who are over the age of sixty five have
actually established a pension and that compares, I think, very
favorably to APPA related funds where it's just under fifty
percent at forty nine percent. And so it's clear to
us from that one data point that certainly SMSEF trustes
are typically far more engaged with their superannuation, which we
(04:32):
do think is a good thing, irrespective whether it's an
approfund or.
Speaker 2 (04:35):
An s SEF.
Speaker 1 (04:37):
Stay with me. Tim will be back in a minute.
I'm speaking to Class CEO Tim Steele to the annual
benchmark report. One of the things that came out was
changes to tax liabilities and how that's affecting members. Can
you explain that.
Speaker 2 (04:58):
Yes, so I should be really clear.
Speaker 3 (04:59):
Sean proposed legislation, So it's quite controversial legislation that's yet
to actually pass the Senate. We think it's going back
in October, but it's it's Division two nine six, and
effectively there's a cap at over three million dollars at
which you will pay a great tax on assets above
that amount, and so we've done some analysis for the
first time looking at what that impact might be to
(05:21):
class members. And look, it probably surprised us on the
significance of the potential tax liability on average for the
affected members. And there were sixteen thousand, or just sixteen
and a half thousand members on class data that would be
affected at an average tax liability of just under fifty
thousand dollars, so it was forty nine thousand, nine hundred
and twenty five dollars.
Speaker 2 (05:40):
The challenge then again became, well.
Speaker 3 (05:42):
How many of those are going to be able to
afford to pay that tax without having to sell assets,
and we found that there were five percent who are
going to struggle to pay that tax bill.
Speaker 1 (05:51):
Well, it's still a lot of people who have that
much in superannuation.
Speaker 2 (05:54):
Though. It is a lot of people have that much money.
Speaker 3 (05:58):
And I think, and that's probably why from a political perspective,
it's seemed to be sort of fair game if you like,
I don't think anyone's going to be crying or for
those people who've got over three million dollars in their
in their super our view, and I have to say,
you know, is that it is a really interesting potential
legislation that I think for the first time is proposing
to tax unrealized games, which I think creates a really
(06:20):
interesting and potentially problematic precedent for tax law in Australia.
And it means that people may not have had the
benefit of the obviously realizing that asset and therefore may
not have the cash reserves available to actually pay the
taxes liable.
Speaker 1 (06:33):
Okay, what about asset allocation? What are you saying there?
We hear lots about ETF and you know, we speak
to people talking about exchange traded funds, are self managed
super fund participants participating in that whole ETF popularism at
the moment.
Speaker 3 (06:51):
Yeah, not surprising, I think for the reasons that you'd
be familiar with, Sean that you know, there's are transparent,
low cost, diversified elements of ETFs that make them really
attractive to the right clients at.
Speaker 2 (07:01):
Least for a proportion of your portfolio.
Speaker 3 (07:03):
And so our data shows that now just under thirty
three percent of all smsfs on class actually hold smsfs,
and they are in aggregate about five point four percent
of the total assets on class, and we have you
know circa three hundred and three hundred and twenty five
billion dollars that's administered on class and so it's a
(07:25):
reasonable chunk of change that is flowing into ETFs.
Speaker 1 (07:29):
Okay, another thing in the report, it talks about members
not receiving advice. We're feeling great, are great believes in advice,
But if you're you've got half a million dollars, you've
probably be pretty good not to receive advice. I suspect.
Speaker 2 (07:43):
Oh.
Speaker 3 (07:43):
Look, we were also big believers in advice, Sean, and
that number does concern us, and it's not surprising for
our data, Just under fifty thousand members have received advice
the last three years, so that number has been fairly
stagnant as the number of smsfs have grown. As a
percentage there for the number of people receiving advice is
gone has gone down, and we track that data by
(08:04):
looking at the number of funds that actually have an
advice fee deducted from their account. Look, we still believe
there's an opportunity for more Australians to get advice, and
we're hopeful that the Quality of Advice Review Tranch two
as that's released, will at least create the capacity for
more Australians to get advice cop effectively irrespective of whether
you have an smsre for or an approfund.
Speaker 1 (08:27):
So how do we get people more enthusiastic about getting advice?
Speaker 3 (08:31):
Well, I think this is part of that. I think
really what's driving some of the regulatory reform that's been proposed,
and I touched on quality of advice review, which is
all about the accessibility and affordability of advice, removing red
tape and some of the complexities that make advice more
expensive for advisors to comply with the legislation. And I
think the fact that we're going to have a different
(08:52):
tier of advisor if TRUNCH two is passed, then that
will at least enable people through their super fund to
be able to get access to I mean, we'd love
to see quite openly with obvious commercial bias declared Sean,
we'd love to see the accountants exemption for SMSF advice return.
We think that would be a real benefit to ultimately
(09:13):
smsfs and more Australians getting access to advice. But I
really think that that the QAI reforms are an important
step towards seeking to achieve that. And then it's helping
continue to reinforce the value of advice. I think people
have got to take a proactive step to want to
do something about their situation, and either reaching out to
their super fund or their accountant or their advisor can.
Speaker 2 (09:34):
With important steps towards getting the right advice.
Speaker 1 (09:37):
Do you think these self managed super fun sector will
continue to grow? And this, of course is related to
the advice question, because if there are more people doing themselves,
I hope there's more demand for advisors.
Speaker 2 (09:49):
Yeah, we hope so too, Sean.
Speaker 3 (09:50):
I mean, I think just I don't think it's necessarily
perfectly characterization of saying, hey, SMSFS equals DIY. SMSF is
obviously a tax structure which you hold superannuation assets, and
it gets based on our data, twenty seven percent of
those people are actually getting advice today. There may have
been a greater percentage who got advice earlier. We do
believe the s MESSF sector will continue to grow because
(10:13):
we think it's a really attractive, flexible structure that supports
people as there needs to become more complex and so
for that reason, we believe smsfs will continue to be
attractive and we hope people are getting advice where it's
appropriately to do so.
Speaker 1 (10:26):
Tim, thank you for talking to Fear and Greed.
Speaker 2 (10:28):
Thank you for having me Sean.
Speaker 1 (10:29):
Now was Tim Steel, CEO of Class. This is the
Fear and Greed Business Interview. Remember this is general information
only and you should seek professional advice as we've just
been discussing before making investment decisions. Join us every morning
for the full episode of Fear and Greed Daily business
years for people who make their own decisions. I'm Joan Elmer.
Enjoy your day.
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