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SMSF trustees immune to vertical integration
Conflicts of interest stemming from vertically-integrated business models are less likely to negatively impact SMSF trustees than other investor profiles, according to two industry commentators.
The SMSF Academy’s Aaron Dunn told SMSF Adviser that the movement of the larger financial institutions into the SMSF market stems from a strategic desire to “stem the leakage [from rival superannuation segments] or to leverage other products and channels”.
“They are all looking at the opportunities for vertical integration,” Mr Dunn said.
However, while the corporate strategy of vertical integration may lead to conflicts of interest or even product bias among some advice professionals – as suggested by SPAA in its submission to the Financial System Inquiry – Mr Dunn suggested that SMSF trustees may not be as susceptible to these potential biases as other advice clients.
“Trustees are very engaged, very informed, they read the news and understand our industry,” Mr Dunn said, adding that the debate over vertical integration is likely to “play out a little differently” in the SMSF space.
Andrew Varlamos, commercial director of SMSF platform and admin provider Praemium, concurred with Mr Dunn’s sentiments, telling SMSF Adviser that “it is certainly the case that SMSF trustees have a very independent [mindset]”.
“You can have a very interesting discussion about advice, investment managers and platforms, but you can’t directly replicate that discussion [of vertical integration] in the SMSF administration market,” Mr Varlamos said.
The comments follow AMP's rejection of claims that SMSF administration tools serve a restrictive purpose.
I agree with Aaron. With the ability to use Direct shares,LICs, ETF's and the coming mFund services as well as TD's and High Interest Cash Accounts most SMSF do not have to consider platforms at all and can seek the best provider for each service. Just look at the Australian Money Market Term Deposit Facility which means Advisors to SMSF Trustees can move funds around 20+ institutions to get the best rates and terms with the tick of a box.0- My response to this is:
Dixon Advisory [a vertically integrated model if ever there was one]
Noting that also with the banks getting into SMSF solutions (and they won't get into the business if they were not going to get clients / trustees on board).
Which disproves Mr Dunn's view.
The reality is that SMSF trustees are like any other client and while some may have more of a independent mind set. It won't stop them buy bank products and solutions.
Fergus Hardingham (Independent Adviser]0
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