Super balance cap to impact a third of SMSF clients

The 18th annual edition of Investment Trends’ 2023 SMSF Adviser Report is based on an in-depth study of 185 SMSF advisers conducted between February and April 2023. It provides an in-depth analysis of how financial advisers interact with and service SMSF investors and their relationship with accountants.

The report found the raft of new policy proposals from the government, including indexation of the transfer balance cap (TBC) and the $3 million cap, have presented many more engagement opportunities for SMSF advisers.

According to SMSF advisers, the proposed and recently implemented regulations have the potential to significantly impact their clients.

On average, they estimate the indexation of the TBC may affect approximately one in three SMSF clients, and that the $3 million cap is likely to impact 32 per cent of their clients.

When it comes to client conversations surrounding these changes, the research notes 24 per cent of SMSFs have actively initiated discussions with their adviser about the proposed tax increase on super balances over $3 million, while only two per cent have done so about the indexation of the TBC.

“Fast changing regulation has exacerbated the complexity of the superannuation system and continues to pose a great challenge for SMSFs,” said Irene Guiamatsia, head of research at Investment Trends.

“Our research tells us advisers are anticipating the indexation of the transfer balance cap as having the greatest impact, however investors themselves are actually more concerned with the $3 million cap proposal.”

The report also reveals the proportion of financial advisers providing SMSF advice continues to rise (79 per cent, up from 74 per cent in 2022 and 72 per cent in 2021), noting this results in a lower proportion of SMSF specialists who service over 20 SMSF clients.

With the influx of changes and a rise in trustees seeking advice, the report found two in five advisers have reported an increase in practice revenue derived from SMSF clients over the past year.

“There may yet be brighter days ahead. While deliberations on the QAR are ongoing, ASIC’s INFO 274 issued in December 2022 look to have already had impact in shifting the views of some advisers on client suitability,” Ms Guiamatsia said.

“It’s pleasing to see advised SMSFs appreciate the value delivered and be amenable to paying more for it.

“The challenge for advisers is to demonstrate value to the much larger pool of unadvised trustees who acknowledge gaps but remain reluctant to seek advice”.