Preliminary unofficial data on registrations of self-managed super funds (SMSFs) points to resurgent popularity of the vehicle. While Australian Taxation Office (ATO) data has not been officially updated, unofficial numbers have been shared at conferences showing a spike in registrations, reversing a trend of the last few years – indicating that Australia’s army of 1.1 million SMSF members, in close to 600,000 funds, is poised to swell. The number of SMSF registrations received between July 2019 and December 2019 was 11,558, up 5.5% on the same period in 2018. And according to SMSF Association chief executive, John Maroney, that trend has strengthened in 2020. “SMSF registrations for January and February 2020 were 3,246 compared with 2,807 SMSFs registered during the same period last year. That’s an increase of 15.6%,” says Maroney. “And early indications, to 25 March, suggest that SMSF registrations were running 6% above those in March 2019.” Some advisers speculate that an investor reaction toward having greater control over their investments may be emerging in the wake of the Crash; there may also be a reaction to concerns about early access to super causing asset sales by the public-offer funds to fund these redemptions. “Control is probably top of the list. There are other factors; when the markets get volatile and there’s concerns about what’s happening in large funds of whatever flavour, I think people do think more about, ‘Should I just stay there and let someone else manage my money and take all the risk with that, or should I think about doing it myself?’ – with whatever degree of support and advice that people feel comfortable with,” says Maroney. “The numbers may also reflect that some of the public-offer super funds have been receiving requests for early-access to super and have been selling assets to meet those redemption requests: in a unitised situation, that’s not good for you if you’re not wishing to sell,” he adds. “In particular, some of the industry funds have younger members in industries such as retail and hospitality that have been hit the hardest, and many of them have taken the opportunity to pull some money out. If the fund is selling assets to fund those requests, that is affecting all members.” Access to cash is also a probable driver, says Maroney. “That’s a really interesting dilemma for a lot of retirees; they’re concerned about selling-down securities to finance their income, with interest being so low, equity dividends being cut or deferred, and property rents being suspended or reduced. One of the areas there is that a well-managed SMSF is probably, if you’re in retirement phase, holding a couple of years’ worth of cash being held. People have that option of drawing-down cash, without having to sell any securities at the bottom of the market. But where the cash is held in a unitised vehicle, you have to sell a part of everything to get the cash,” Maroney adds. Another area where advisers report increased interest in the SMSF vehicle is in the ability to tailor the investment in a more targeted fashion – for instance, in making environmental, social and governance (ESG) investment tilts – and in capped fees. “Particularly in the larger SMSFs, the fees are flat fees; you pay your accounting fees, other fees, so whether you have $500,000 or $1 million you might have very similar fee levels. Most larger public-offer funds don’t have caps and your fees keep rising as a percentage of assets. For the larger accounts that is a driver for people who do want a cheaper option,” says Maroney. “You can structure SMSFs to be quite flat in terms of fees: we’ve said repeatedly that if you have a fund that’s under $500,000 in size, your fees should be less than $5,000, and for most, less than $4,000. We’re expecting that the next data published will validate that,” he says. Nick Bruining, independent financial Planner at Bruining Partners, is not convinced. “Look, I’m still a bit wary of SMSFs ending up as AMSFs – Adviser-Managed Super Funds – with the punter wearing the bills,” he says. “I just don’t think there is enough time spent exploring the alternatives that are out there.” In particular, says Bruining, technology and economies-of-scale have brought the capabilities and pricing of what ostensibly behaves like a SMSF, under the ambit of public-offer schemes. “I’m thinking of some of the low-cost wraps, in particular. I think that these days, for a lot of what supposedly motivates people to establish a SMSF, you can replicate all of those drivers within a broad-based wrap fund – you have ASX-listed equities, exchange-traded funds (ETFs), TDs from multiple institutions, most of it is there – I don’t think you specifically need a SMSF to achieve many of those outcomes.” Bruining excludes direct holdings of property – if there is an argument for that, he says, the SMSF is clearly the appropriate vehicle. “But that’s very different to where you see a client with a property in an SMSF because that’s what they were advised to do,” he adds. Cost arguments also don’t cut much ice with him. “We see a lot of what I call ‘refugee’ work – where people have had a SMSF and they want a second opinion on it. When we point out the statutory reporting costs, the accounting costs, and then on top of that the adviser costs, it’s not uncommon to see 200 basis points disappearing out the door, which the client could get quite easily for under 100 basis points on the public-offer platform,” Bruining says. Maroney stresses that SMSFs should not be viewed as one sector of super competing for business with other sectors. “It’s more about people trying to find the best structure that suits them at a time of their life, career and otherwise. It’s less about competition per se, it’s more whether SMSFs are suitable for some subsets of those people saving for retirement. We certainly don’t advocate that SMSFs are suitable for everyone; the SMSF structure’s suitability for people will change over time.” In that context, Maroney says the SMSF Association always encourages people to research that suitability in terms of comparisons, both in terms of deciding to establish an SMSF and in maintaining it. “Most people coming into the SMSF structure are in their 40s or above, because you need to build up a reasonable balance; and people won’t stay in that structure forever. We find that once people get into their mid-70s and beyond – particularly if they lose a partner – that’s probably a signal that they might want a simpler way of dealing with things. The sweet-spot for SMSFs is probably in that 45–75 age range,” he says.