1 00:00:05,559 --> 00:00:08,240 Speaker 1: Welcome to the Fear and Greed Business Interview. I'm Sean Almer. 2 00:00:08,400 --> 00:00:11,520 Speaker 1: The self managed super fund sector in Australia has hit 3 00:00:11,560 --> 00:00:13,920 Speaker 1: a new record with more than six hundred and twenty 4 00:00:13,920 --> 00:00:17,640 Speaker 1: five thousand self managed super funds now registered. There's been 5 00:00:17,680 --> 00:00:20,520 Speaker 1: a strong rebound since COVID, with gen X leading the 6 00:00:20,520 --> 00:00:24,360 Speaker 1: way in the SMSF world. There are some These are 7 00:00:24,440 --> 00:00:27,240 Speaker 1: some of the findings from the annual benchmark report from 8 00:00:27,440 --> 00:00:30,840 Speaker 1: Class And, an Australian accounting technology company with a focus 9 00:00:30,920 --> 00:00:34,159 Speaker 1: on smsfs. As always, this is general information only and 10 00:00:34,200 --> 00:00:37,440 Speaker 1: you should seek professional advice before making investment decisions. She'll 11 00:00:37,479 --> 00:00:39,040 Speaker 1: talk to someone also if you want to get into 12 00:00:39,080 --> 00:00:42,920 Speaker 1: an SMSF fund yourself. Tim Steele is the CEO of 13 00:00:42,960 --> 00:00:44,440 Speaker 1: Class Team. Welcome back to Fear and. 14 00:00:44,360 --> 00:00:46,400 Speaker 2: Greed, Sean, Thank you having lovely to be back. 15 00:00:47,000 --> 00:00:50,239 Speaker 1: So the sector is growing. What's behind that? 16 00:00:50,800 --> 00:00:54,279 Speaker 3: Oh, I think it's reflective of people's continued interest in 17 00:00:54,400 --> 00:00:58,200 Speaker 3: taking control of their super and wanting to at least 18 00:00:58,360 --> 00:01:00,840 Speaker 3: take a more active role. It's supporting long term retirement 19 00:01:00,840 --> 00:01:04,160 Speaker 3: outcomes and smsfs continue to be a really attractive vehicle 20 00:01:04,200 --> 00:01:06,560 Speaker 3: for doing that. We know technology has played a role, 21 00:01:06,640 --> 00:01:10,640 Speaker 3: so there are opportunity for people to perhaps access SMSF fund, 22 00:01:10,720 --> 00:01:13,480 Speaker 3: establish it, and or manage it perhaps more cost effectively, 23 00:01:14,080 --> 00:01:16,280 Speaker 3: and so we think that's driving the overall growth. 24 00:01:16,959 --> 00:01:20,200 Speaker 1: We haven't actually done much on DII funds for quite 25 00:01:20,240 --> 00:01:23,759 Speaker 1: a while. So just really quickly, Tim, give us the 26 00:01:23,800 --> 00:01:27,280 Speaker 1: pros and cons of an SMSF and the sort of people. 27 00:01:27,640 --> 00:01:30,039 Speaker 1: And I appreciate that your role in life, you'd have 28 00:01:30,080 --> 00:01:32,399 Speaker 1: many many pros and very few cons. But now give 29 00:01:32,480 --> 00:01:34,880 Speaker 1: us both sides of the coin and the people who 30 00:01:34,880 --> 00:01:35,840 Speaker 1: were most suited to it. 31 00:01:36,640 --> 00:01:38,280 Speaker 3: I can rely on our data, Sean, I think you 32 00:01:38,280 --> 00:01:40,479 Speaker 3: can tell us who's actually establishing funds. 33 00:01:40,520 --> 00:01:41,640 Speaker 2: So that's interesting. 34 00:01:41,640 --> 00:01:43,720 Speaker 3: And you said in your introductory remarks that it's been 35 00:01:43,800 --> 00:01:46,679 Speaker 3: driven by gen X. That is true based on our 36 00:01:46,760 --> 00:01:48,880 Speaker 3: data and that and that and millennials. We've got just 37 00:01:48,920 --> 00:01:52,600 Speaker 3: over eighty percent of establishments for that sector, and the 38 00:01:52,640 --> 00:01:55,240 Speaker 3: average balance on establishment this year for the first time, 39 00:01:55,280 --> 00:01:58,640 Speaker 3: based on our data, exceeded five hundred thousand, five hundred 40 00:01:58,680 --> 00:02:00,240 Speaker 3: and thirty seven thousand for at differ. 41 00:02:00,360 --> 00:02:01,880 Speaker 2: So when we think about who. 42 00:02:01,720 --> 00:02:04,720 Speaker 3: Is establishing it, it's typically the gen X, but also 43 00:02:04,800 --> 00:02:08,200 Speaker 3: millennials almost twenty eight percent, and they're established it with 44 00:02:08,320 --> 00:02:11,959 Speaker 3: over half a million dollars of superannuation assets when they join, 45 00:02:12,000 --> 00:02:14,080 Speaker 3: which I think gives you a sense of the point 46 00:02:14,080 --> 00:02:16,799 Speaker 3: at which perhaps either they take much greater interest in 47 00:02:16,880 --> 00:02:20,000 Speaker 3: their super and therefore in SMSF might make more sense, 48 00:02:20,480 --> 00:02:22,239 Speaker 3: or they reach a stage where they've got a certain 49 00:02:22,280 --> 00:02:25,600 Speaker 3: scale that actually the economics of an SMSF may make 50 00:02:25,639 --> 00:02:28,640 Speaker 3: more sense as well, so the pros and cons it 51 00:02:28,720 --> 00:02:31,760 Speaker 3: depends for us. Really, we don't want just everyone piling 52 00:02:31,800 --> 00:02:34,360 Speaker 3: into smsfs. It's like everything. We encourage people to get 53 00:02:34,360 --> 00:02:37,640 Speaker 3: advice with big believers in the benefits of financial advice, 54 00:02:37,680 --> 00:02:41,000 Speaker 3: and so ultimately financial advisors we're making recommendations to their 55 00:02:41,000 --> 00:02:43,640 Speaker 3: clients where they think it makes sense. And it's not 56 00:02:43,760 --> 00:02:46,079 Speaker 3: just driven by the amount of money you've got in 57 00:02:46,120 --> 00:02:49,040 Speaker 3: your superannuation fund. I think it's determined by your own 58 00:02:49,080 --> 00:02:51,600 Speaker 3: personal preferences, type of assets you want to hold, the 59 00:02:51,680 --> 00:02:54,480 Speaker 3: role that you want to have in contributing to helping 60 00:02:54,520 --> 00:02:57,880 Speaker 3: shape your super. But it is a very flexible solution 61 00:02:58,000 --> 00:02:59,720 Speaker 3: that can grow with you over time as you become 62 00:03:00,120 --> 00:03:02,640 Speaker 3: perhaps you need to become more complex, and it does 63 00:03:02,800 --> 00:03:05,440 Speaker 3: give you the control that I think many Australians see 64 00:03:06,040 --> 00:03:08,480 Speaker 3: certainly it can be at different stages of life. 65 00:03:08,480 --> 00:03:09,280 Speaker 2: It can be a little bit. 66 00:03:09,240 --> 00:03:11,960 Speaker 3: More complicated for people where you're actually if you are 67 00:03:12,040 --> 00:03:13,760 Speaker 3: doing it yourselves, and so they may come a point 68 00:03:13,760 --> 00:03:17,000 Speaker 3: in time we'd prefer to delegate or have actually an 69 00:03:17,040 --> 00:03:20,120 Speaker 3: Apple regulated fund take care of that for you. But 70 00:03:20,200 --> 00:03:23,680 Speaker 3: we are seeking people hold smsfs longer, and certainly when 71 00:03:23,720 --> 00:03:26,960 Speaker 3: we look at our non concessional contributions, we've seen that 72 00:03:26,960 --> 00:03:28,400 Speaker 3: at a much older age grip as well. 73 00:03:29,160 --> 00:03:31,240 Speaker 1: I mean I had an SMSF for a while. My 74 00:03:31,400 --> 00:03:33,960 Speaker 1: work kind of made me convinced me to not do 75 00:03:34,000 --> 00:03:36,040 Speaker 1: it anymore because I talk about all sorts of companies 76 00:03:36,040 --> 00:03:38,480 Speaker 1: and bonds and things like that, and I actually preferred 77 00:03:38,480 --> 00:03:40,560 Speaker 1: be at arm's length. But the one thing about it 78 00:03:40,600 --> 00:03:43,920 Speaker 1: which I learned from the experience was the need to 79 00:03:44,080 --> 00:03:47,640 Speaker 1: be continually across it. It's not a set and forget product, 80 00:03:47,760 --> 00:03:47,960 Speaker 1: is it. 81 00:03:48,880 --> 00:03:49,800 Speaker 2: No, it's not quite. 82 00:03:49,800 --> 00:03:53,240 Speaker 3: Frankly, we don't think superannuation should be for anyone given 83 00:03:53,280 --> 00:03:55,280 Speaker 3: me importance of what it might mean for the long term, 84 00:03:55,720 --> 00:03:58,320 Speaker 3: long term timement outcomes. But you are right that I 85 00:03:58,320 --> 00:04:01,720 Speaker 3: think typically people who choose to have an SMSF do 86 00:04:01,840 --> 00:04:04,720 Speaker 3: want to be more engaged in the process, and we 87 00:04:04,760 --> 00:04:07,200 Speaker 3: see that in some of our data, and when we 88 00:04:07,280 --> 00:04:10,880 Speaker 3: think about things like account the pension establishment. We look 89 00:04:10,880 --> 00:04:13,880 Speaker 3: at our data and ninety three percent of members on 90 00:04:13,920 --> 00:04:15,720 Speaker 3: Class who are over the age of sixty five have 91 00:04:15,800 --> 00:04:19,560 Speaker 3: actually established a pension and that compares, I think, very 92 00:04:19,880 --> 00:04:22,479 Speaker 3: favorably to APPA related funds where it's just under fifty 93 00:04:22,520 --> 00:04:25,279 Speaker 3: percent at forty nine percent. And so it's clear to 94 00:04:25,400 --> 00:04:29,360 Speaker 3: us from that one data point that certainly SMSEF trustes 95 00:04:29,360 --> 00:04:32,800 Speaker 3: are typically far more engaged with their superannuation, which we 96 00:04:32,839 --> 00:04:34,760 Speaker 3: do think is a good thing, irrespective whether it's an 97 00:04:34,800 --> 00:04:35,760 Speaker 3: approfund or. 98 00:04:35,680 --> 00:04:36,360 Speaker 2: An s SEF. 99 00:04:37,000 --> 00:04:42,600 Speaker 1: Stay with me. Tim will be back in a minute. 100 00:04:45,760 --> 00:04:49,839 Speaker 1: I'm speaking to Class CEO Tim Steele to the annual 101 00:04:49,839 --> 00:04:52,080 Speaker 1: benchmark report. One of the things that came out was 102 00:04:52,520 --> 00:04:56,480 Speaker 1: changes to tax liabilities and how that's affecting members. Can 103 00:04:56,480 --> 00:04:57,160 Speaker 1: you explain that. 104 00:04:58,040 --> 00:04:59,200 Speaker 2: Yes, so I should be really clear. 105 00:04:59,240 --> 00:05:03,800 Speaker 3: Sean proposed legislation, So it's quite controversial legislation that's yet 106 00:05:03,839 --> 00:05:05,760 Speaker 3: to actually pass the Senate. We think it's going back 107 00:05:05,800 --> 00:05:09,560 Speaker 3: in October, but it's it's Division two nine six, and 108 00:05:09,600 --> 00:05:12,640 Speaker 3: effectively there's a cap at over three million dollars at 109 00:05:12,680 --> 00:05:15,400 Speaker 3: which you will pay a great tax on assets above 110 00:05:15,440 --> 00:05:18,240 Speaker 3: that amount, and so we've done some analysis for the 111 00:05:18,279 --> 00:05:21,120 Speaker 3: first time looking at what that impact might be to 112 00:05:21,240 --> 00:05:24,719 Speaker 3: class members. And look, it probably surprised us on the 113 00:05:24,760 --> 00:05:27,919 Speaker 3: significance of the potential tax liability on average for the 114 00:05:27,960 --> 00:05:30,640 Speaker 3: affected members. And there were sixteen thousand, or just sixteen 115 00:05:30,640 --> 00:05:33,840 Speaker 3: and a half thousand members on class data that would be 116 00:05:33,880 --> 00:05:37,599 Speaker 3: affected at an average tax liability of just under fifty 117 00:05:37,600 --> 00:05:39,799 Speaker 3: thousand dollars, so it was forty nine thousand, nine hundred 118 00:05:39,800 --> 00:05:40,599 Speaker 3: and twenty five dollars. 119 00:05:40,960 --> 00:05:42,719 Speaker 2: The challenge then again became, well. 120 00:05:42,520 --> 00:05:43,640 Speaker 3: How many of those are going to be able to 121 00:05:43,680 --> 00:05:47,280 Speaker 3: afford to pay that tax without having to sell assets, 122 00:05:47,400 --> 00:05:49,440 Speaker 3: and we found that there were five percent who are 123 00:05:49,480 --> 00:05:51,720 Speaker 3: going to struggle to pay that tax bill. 124 00:05:51,880 --> 00:05:53,520 Speaker 1: Well, it's still a lot of people who have that 125 00:05:53,600 --> 00:05:54,720 Speaker 1: much in superannuation. 126 00:05:54,839 --> 00:05:58,200 Speaker 2: Though. It is a lot of people have that much money. 127 00:05:58,200 --> 00:06:01,200 Speaker 3: And I think, and that's probably why from a political perspective, 128 00:06:01,279 --> 00:06:03,159 Speaker 3: it's seemed to be sort of fair game if you like, 129 00:06:03,160 --> 00:06:05,120 Speaker 3: I don't think anyone's going to be crying or for 130 00:06:05,160 --> 00:06:07,240 Speaker 3: those people who've got over three million dollars in their 131 00:06:07,320 --> 00:06:09,520 Speaker 3: in their super our view, and I have to say, 132 00:06:09,600 --> 00:06:13,240 Speaker 3: you know, is that it is a really interesting potential 133 00:06:13,360 --> 00:06:16,320 Speaker 3: legislation that I think for the first time is proposing 134 00:06:16,360 --> 00:06:19,480 Speaker 3: to tax unrealized games, which I think creates a really 135 00:06:20,000 --> 00:06:24,520 Speaker 3: interesting and potentially problematic precedent for tax law in Australia. 136 00:06:24,839 --> 00:06:27,159 Speaker 3: And it means that people may not have had the 137 00:06:27,200 --> 00:06:30,160 Speaker 3: benefit of the obviously realizing that asset and therefore may 138 00:06:30,160 --> 00:06:32,240 Speaker 3: not have the cash reserves available to actually pay the 139 00:06:32,279 --> 00:06:33,040 Speaker 3: taxes liable. 140 00:06:33,680 --> 00:06:35,920 Speaker 1: Okay, what about asset allocation? What are you saying there? 141 00:06:35,960 --> 00:06:39,880 Speaker 1: We hear lots about ETF and you know, we speak 142 00:06:39,880 --> 00:06:43,640 Speaker 1: to people talking about exchange traded funds, are self managed 143 00:06:43,640 --> 00:06:50,600 Speaker 1: super fund participants participating in that whole ETF popularism at 144 00:06:50,600 --> 00:06:50,960 Speaker 1: the moment. 145 00:06:51,440 --> 00:06:53,640 Speaker 3: Yeah, not surprising, I think for the reasons that you'd 146 00:06:53,640 --> 00:06:56,440 Speaker 3: be familiar with, Sean that you know, there's are transparent, 147 00:06:56,520 --> 00:06:59,960 Speaker 3: low cost, diversified elements of ETFs that make them really 148 00:07:00,600 --> 00:07:01,960 Speaker 3: attractive to the right clients at. 149 00:07:01,960 --> 00:07:03,760 Speaker 2: Least for a proportion of your portfolio. 150 00:07:03,800 --> 00:07:07,400 Speaker 3: And so our data shows that now just under thirty 151 00:07:07,440 --> 00:07:12,360 Speaker 3: three percent of all smsfs on class actually hold smsfs, 152 00:07:12,640 --> 00:07:15,640 Speaker 3: and they are in aggregate about five point four percent 153 00:07:15,680 --> 00:07:18,880 Speaker 3: of the total assets on class, and we have you 154 00:07:18,920 --> 00:07:21,400 Speaker 3: know circa three hundred and three hundred and twenty five 155 00:07:21,440 --> 00:07:25,040 Speaker 3: billion dollars that's administered on class and so it's a 156 00:07:25,080 --> 00:07:28,920 Speaker 3: reasonable chunk of change that is flowing into ETFs. 157 00:07:29,720 --> 00:07:33,160 Speaker 1: Okay, another thing in the report, it talks about members 158 00:07:33,360 --> 00:07:37,200 Speaker 1: not receiving advice. We're feeling great, are great believes in advice, 159 00:07:37,200 --> 00:07:40,600 Speaker 1: But if you're you've got half a million dollars, you've 160 00:07:40,600 --> 00:07:42,800 Speaker 1: probably be pretty good not to receive advice. I suspect. 161 00:07:43,400 --> 00:07:43,520 Speaker 2: Oh. 162 00:07:43,600 --> 00:07:47,160 Speaker 3: Look, we were also big believers in advice, Sean, and 163 00:07:47,200 --> 00:07:49,960 Speaker 3: that number does concern us, and it's not surprising for 164 00:07:50,040 --> 00:07:54,320 Speaker 3: our data, Just under fifty thousand members have received advice 165 00:07:54,360 --> 00:07:56,720 Speaker 3: the last three years, so that number has been fairly 166 00:07:56,760 --> 00:07:59,400 Speaker 3: stagnant as the number of smsfs have grown. As a 167 00:07:59,400 --> 00:08:01,920 Speaker 3: percentage there for the number of people receiving advice is 168 00:08:01,960 --> 00:08:04,800 Speaker 3: gone has gone down, and we track that data by 169 00:08:04,960 --> 00:08:07,000 Speaker 3: looking at the number of funds that actually have an 170 00:08:07,000 --> 00:08:10,880 Speaker 3: advice fee deducted from their account. Look, we still believe 171 00:08:10,880 --> 00:08:14,880 Speaker 3: there's an opportunity for more Australians to get advice, and 172 00:08:14,920 --> 00:08:18,840 Speaker 3: we're hopeful that the Quality of Advice Review Tranch two 173 00:08:18,880 --> 00:08:21,160 Speaker 3: as that's released, will at least create the capacity for 174 00:08:21,520 --> 00:08:24,840 Speaker 3: more Australians to get advice cop effectively irrespective of whether 175 00:08:24,880 --> 00:08:26,520 Speaker 3: you have an smsre for or an approfund. 176 00:08:27,080 --> 00:08:30,760 Speaker 1: So how do we get people more enthusiastic about getting advice? 177 00:08:31,440 --> 00:08:34,200 Speaker 3: Well, I think this is part of that. I think 178 00:08:34,240 --> 00:08:37,600 Speaker 3: really what's driving some of the regulatory reform that's been proposed, 179 00:08:37,600 --> 00:08:40,000 Speaker 3: and I touched on quality of advice review, which is 180 00:08:40,000 --> 00:08:43,840 Speaker 3: all about the accessibility and affordability of advice, removing red 181 00:08:44,080 --> 00:08:46,679 Speaker 3: tape and some of the complexities that make advice more 182 00:08:46,720 --> 00:08:50,160 Speaker 3: expensive for advisors to comply with the legislation. And I 183 00:08:50,200 --> 00:08:51,920 Speaker 3: think the fact that we're going to have a different 184 00:08:52,040 --> 00:08:55,480 Speaker 3: tier of advisor if TRUNCH two is passed, then that 185 00:08:55,600 --> 00:08:57,800 Speaker 3: will at least enable people through their super fund to 186 00:08:57,840 --> 00:09:00,840 Speaker 3: be able to get access to I mean, we'd love 187 00:09:00,920 --> 00:09:05,280 Speaker 3: to see quite openly with obvious commercial bias declared Sean, 188 00:09:05,320 --> 00:09:09,640 Speaker 3: we'd love to see the accountants exemption for SMSF advice return. 189 00:09:10,280 --> 00:09:13,120 Speaker 3: We think that would be a real benefit to ultimately 190 00:09:13,200 --> 00:09:17,280 Speaker 3: smsfs and more Australians getting access to advice. But I 191 00:09:17,320 --> 00:09:20,520 Speaker 3: really think that that the QAI reforms are an important 192 00:09:20,559 --> 00:09:23,600 Speaker 3: step towards seeking to achieve that. And then it's helping 193 00:09:23,720 --> 00:09:26,800 Speaker 3: continue to reinforce the value of advice. I think people 194 00:09:26,800 --> 00:09:28,440 Speaker 3: have got to take a proactive step to want to 195 00:09:28,480 --> 00:09:31,440 Speaker 3: do something about their situation, and either reaching out to 196 00:09:31,440 --> 00:09:34,320 Speaker 3: their super fund or their accountant or their advisor can. 197 00:09:34,200 --> 00:09:36,360 Speaker 2: With important steps towards getting the right advice. 198 00:09:37,559 --> 00:09:40,160 Speaker 1: Do you think these self managed super fun sector will 199 00:09:40,200 --> 00:09:42,640 Speaker 1: continue to grow? And this, of course is related to 200 00:09:42,679 --> 00:09:45,959 Speaker 1: the advice question, because if there are more people doing themselves, 201 00:09:46,080 --> 00:09:48,600 Speaker 1: I hope there's more demand for advisors. 202 00:09:49,160 --> 00:09:50,560 Speaker 2: Yeah, we hope so too, Sean. 203 00:09:50,600 --> 00:09:53,359 Speaker 3: I mean, I think just I don't think it's necessarily 204 00:09:53,559 --> 00:09:58,320 Speaker 3: perfectly characterization of saying, hey, SMSFS equals DIY. SMSF is 205 00:09:58,360 --> 00:10:01,719 Speaker 3: obviously a tax structure which you hold superannuation assets, and 206 00:10:02,360 --> 00:10:04,360 Speaker 3: it gets based on our data, twenty seven percent of 207 00:10:04,360 --> 00:10:07,000 Speaker 3: those people are actually getting advice today. There may have 208 00:10:07,000 --> 00:10:10,480 Speaker 3: been a greater percentage who got advice earlier. We do 209 00:10:10,600 --> 00:10:13,120 Speaker 3: believe the s MESSF sector will continue to grow because 210 00:10:13,120 --> 00:10:16,640 Speaker 3: we think it's a really attractive, flexible structure that supports 211 00:10:16,679 --> 00:10:19,400 Speaker 3: people as there needs to become more complex and so 212 00:10:19,480 --> 00:10:21,480 Speaker 3: for that reason, we believe smsfs will continue to be 213 00:10:21,480 --> 00:10:24,400 Speaker 3: attractive and we hope people are getting advice where it's 214 00:10:24,400 --> 00:10:26,079 Speaker 3: appropriately to do so. 215 00:10:26,160 --> 00:10:28,079 Speaker 1: Tim, thank you for talking to Fear and Greed. 216 00:10:28,440 --> 00:10:29,360 Speaker 2: Thank you for having me Sean. 217 00:10:29,800 --> 00:10:32,280 Speaker 1: Now was Tim Steel, CEO of Class. This is the 218 00:10:32,280 --> 00:10:35,000 Speaker 1: Fear and Greed Business Interview. Remember this is general information 219 00:10:35,040 --> 00:10:37,280 Speaker 1: only and you should seek professional advice as we've just 220 00:10:37,400 --> 00:10:40,640 Speaker 1: been discussing before making investment decisions. Join us every morning 221 00:10:40,640 --> 00:10:42,679 Speaker 1: for the full episode of Fear and Greed Daily business 222 00:10:42,760 --> 00:10:45,319 Speaker 1: years for people who make their own decisions. I'm Joan Elmer. 223 00:10:45,760 --> 00:10:51,120 Speaker 1: Enjoy your day.