Opportunity for advisers in self-managed funds

Self-managed KiwiSaver funds are likely to be introduced as an option for investors in the near future and will provide a great opportunity for financial advisers, industry figures say.

Monday, September 10th 2012, 7:08AM 2 Comments

by Niko Kloeten

Across the Tasman self-managed super funds have about A$440 billion under management, one-third of the total funds under management in its $A1.5 trillion compulsory super scheme.

And their popularity is growing with a record 34,897 new self-managed super funds opened over the past 12 months, taking the total number in Australia to 478,263.

Their rise has prompted concerns about people with inadequate financial knowledge trying to manage their own funds; the Australian government has recently introduced new rules to improve corporate governance of such schemes.

NZ Funds principal David van Schaardenburg said allowing investors to manage their own KiwiSaver funds would be a "natural" addition to the scheme if and when it's made compulsory like in Australia.

"If we move to compulsion and we're forcing people into it then to get acceptance we have to create something somewhat more flexible; that has occurred in Australia," he said.

KiwiSaver is still in its early days and people are unlikely to be interested in self-managing $6000 (the average fund balance), van Schaardenburg said.

However, he said once balances have grown larger self-managed funds will allow advisers to give more "personalised" solutions than just helping clients pick a KiwiSaver fund.

"It [self-managed super] doesn't reject financial advice at all but it does mean people have highly tailored portfolios," he said.

Heathcote Investment Partners director Clayton Coplestone described the rise of self-managed super funds in Australia as a vote against the fund management industry.

"Investors are saying, ‘listen, I've been with you long enough and I can do it better on my own."

Coplestone said that as KiwiSaver balances grow, investors will get "savvier" about what they are paying and what they are getting in return and financial advisers can play an important role in that regard, particularly when self-managed funds become a reality.

"Good financial advisers will be worth their weight in gold; they'll be in a position to sift through the good the bad and the ugly as long as they've got robust research processes."

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 10 September 2012 at 9:43 pm 15% or bust said:

The bit that few NZ commentators ever seem to mention is that the true motivation in Australia for getting in to Self-Managed Super Funds is that it significantly reduces the tax that wealthy individuals pay.

Give us a 15% tax rate on super funds in NZ and you will see a massive explosion in self-managed schemes. Every wealthy investor in residential and commercial property in the country would be rushing to put their much loved rentals in Self Managed Super Schemes.

On 11 September 2012 at 11:45 am David Whyte said:

To 15% or bust - the tax rate on super investments is certainly a motivation - but it's not the only one, otherwise ALL Australians would be in their own SMSF. Super fund balances in Australia are now reaching proportions which extend the SMSF reach beyond just the wealthy individuals in the community. The ability to exercise greater control over investments also contributes to the popularity of SMSF. Tax is certainly mitigated - but only in the short term, as the emerging income is taxable. The dollars collected from taxing the future accrued funds exceed the tax foregone from the investor's current income.

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