Are Self-managed Superannuation Funds a DISRUPTOR Technology?

Brian Hrnjak from GHR Accounting explains the increasing attraction of self-managed super funds.

A blog post from Deloitte Australia on the topic of why self-managed superannuation funds (SMSF’s) are becoming the dominant form of superannuation in Australia, recently caught my attention.

The author Pete Williams is interesting in that he is not a superannuation expert, rather he describes himself as,“Someone who works in the fields of Innovation, Disruption, Futures and Digital. I am not a superannuation industry specialist but I have kept a very close eye on the Australian Superannuation System for many years.”

Williams notes the current superannuation market is split between SMSF’s accounting for 34% of the market, the largest single segment, with Retail Funds coming in at 26% and Industry Funds at 21%. I was surprised by the (still) high market share of retail funds but it’s probably not surprising given the banks who own them promote them each time you walk into a branch or log onto online banking.

Or maybe all the advertising done by industry funds just makes them seem more dominant? They have no branches so advertising is the only way they have to attract new customers.

EVER GROWNG RETIREMENT WEALTH
In relation to SMSF’s though, Williams notes that they display the three characteristics of ‘disruptive innovation’. “Firstly they were set up to cater for non-users of the mainstream system, secondly, in the early days they cost more and you got less, fi nally, they had a different value proposition, which was the ability to control your funds.”

Furthermore, his argument for the dominance of SMSF’s stems from the combination of their highly customisable nature and improvements in technology. 

We live in a world where customisation is seen as more valuable than a cookie cutter approach and superannuation as a product is no different. Clients of our firm invest in a range of products within their SMSF’s from tradable abalone licences to every form of property to shares listed here and overseas.

The important thing is that they connect with the underlying assets and feel good about holding them as a source of income and a way of increasing wealth in retirement.

But it is advances in technology that Williams argues will keep SMSF’s as the dominant force in superannuation. “Technologies make it feasible to compile a detailed understanding of the social and economic context of the individual at much lower cost than previously imaginable.

THE DIGITAL AGE STREAMLINES PROCESS
“We don’t have to submit to detailed interviews or fi ll out endless questionnaires to provide this information. The trusted advisor, with our permission, can simply watch and analyse the “digital exhaust” from our activities to develop deep insight into who we are and what is important to us.”

And he is right in so much that SMSF administration is becoming more automated with cloud based products that take data feeds direct from banks and broking houses although I don’t know if I like the idea of analysing anyone’s “digital exhaust”. I might just prefer to think of that as having a deeper understanding of the client.

In any case, Williams concludes that the nimble and tailored approach of SMSF’s combined with the cost savings derived from technology, is why SMSF’s will continue to be the dominant player in the Australian superannuation market.


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