A rising tide for SMSFs
There are more reasons than ever for brokers to get into the SMSF market as a growing number of Australians cotton on to the benefits of leveraging their superannuation more effectively in a changing economy
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COMPETITION in the self-managed super funds market is heating up.
After most larger banks pulled out of the SMSF sector several years back, a small number of non-banks were left to dominate what used to be seen as a sleepy niche area. But the growth of the non-bank sector overall, incentives to reposition portfolios as the economy slows, people opting to use their superannuation to buy property, and a trend of brokers diversifying away from overreliance on residential mortgages are factors driving new activity in the market.
“More and more people are taking advantage of managing their own financial affairs, especially in a time when some superannuation returns are not meeting customer expectations,” says Per Amundsen, company secretary at Thinktank.
APRA statistics show the rate of return on assets for all Australian superannuation entities in the year to September 2022 was down to -6.4% as the prospects for global growth weakened over the year.
“Share markets or superannuation funds have been performing pretty poorly, and some people feel like they have more control over their super when it's inside an SMSF,” says Jake Sanders, head of third party sales at Firstmac.
Younger people are increasingly getting into the area. The latest ATO data shows that 13.5% of SMSF members are under the age of 45.
“There appears to be a greater number of younger borrowers who have equipped themselves with a high level of financial literacy and are willing and ready to manage their own investments,” says Amundsen. “The taxation advantages of utilising an SMSF for long-term retirement is particularly attractive to this market.”
A lack of cash savings is also driving some people to leverage their super more effectively.
“Many younger people have more in their super account than they do in savings, and they could see this as the only way they can enter the property market,” says Sanders.
A growing market leads to higher demand for broker services.
“More and more people are looking at alternative options to invest their super in. We also see an opportunity to help reduce the repayments on existing SMSF loans,” says Sanders.
When a borrower decides to proceed down the SMSF path, they need to seek assets that will provide the required return on investment. Those may include a diverse range of assets, including shares, term/cash deposits, listed and unlisted property trusts, and real property.
“This is when a trusted broker becomes critical, especially in situations such as acquiring a freehold property under an SMSF structure,” says Amundsen. “As the number of SMSFs grows, so will the need for brokers offering this specialised guidance.”
Discretionary expenditure and cost of living factors also affect SMSFs less, which mitigates risk.
“SMSFs are immune from the increase in day-to-day expenses such as fuel, energy or groceries, so the net pressure on SMSF investors is less acute than the traditional property investment model,” says Bannister.
Indeed, the softening in house prices combined with double-digit increases in rental yields in many parts of the country and a general undersupply of housing are positive factors for SMSF investors.
“[It's] interpreted as value coming back to the market,” says Bannister. “The current macroeconomic outlook is likely to deliver some good opportunities.”
Thinktank is an SMSF market leader in terms of product range, loan structure options and price. It offers LVRs of up to 80% for both residential and commercial properties purchased in an SMSF, with an additional 10% available to assist with GST requirements.
“Our loan sizes range between $100,000 and $4m, with 30-year loan terms available, including interest-only periods of one to five years,” says Amundsen.
La Trobe Financial also has a broad product range, offering SMSF loans with no minimum fund size and no liquidity requirement. It can also consider additional contributions to demonstrate serviceability, and provide funding for off-the-plan, inner-city and high-rise apartments as well as regional and commercial property.
“We also offer borrowers the opportunity to invest additional amounts in our $9bn credit fund,” says Bannister.
As one of Australia’s leading credit asset managers specialising in asset management and credit, La Trobe Financial is committed to making a positive impact on its community. With seven decades of proven credit management behind it, La Trobe Financial has funded over $36bn of investment for more than 229,000 customers. Its investors include large global institutions, Australia’s major banks, family offices, fund managers and 55,000 everyday investors in its award-winning credit fund. La Trobe Financial is driven by one cause – to place “others before self” and make a positive impact by helping people create wealth with specialist and investment solutions.
Find out more
Thinktank is an independent non-bank financial institution specialising in the provision of commercial-property mortgage finance of up to $4m and residential-property mortgage finance of up to $2m in the Australian self-employed, PAYG and SME sectors. Since 2006, Thinktank has provided over $6.5bn worth of commercial, residential and SMSF lending solutions, which have enabled thousands of borrowers to achieve their goals of acquisition, refinancing and equity release. Thinktank offers a range of lending solutions, which include Full Doc, Mid Doc (Alternate Income Verification), Quick Doc and SMSF loans.
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People are searching for better options in the higher interest rate environment.
“As lower returns for more common investments may not be yielding the same rewards, many are pivoting in an attempt to achieve higher-yielding assets,” says Amundsen.
There’s been steady growth in the number of SMSFs and their total membership over the last few years. Total assets dropped slightly over the course of 2022 but are still around a fifth larger than before the pandemic. The average asset size of an SMSF in FY21 was $1.47m, compared to $1.17m in FY17, according to the Australian Tax Office.
“The degree by which the SMSF sector continues to be embraced by ordinary Australians is a staggering endorsement of its ongoing value,” says Cory Bannister, senior vice president and chief lending officer at La Trobe Financial.
“A principle driving growth of SMSFs is the fundamental desire by Australians to control their own destiny and remain independent.”
Per Amundsen
Thinktank
Industry experts
Per Amundsen is company secretary at Thinktank. Prior to joining the company, he was general manager at AMP Property Finance, where he built a book of $1.5bn in SME commercial property loans. An executive member of the Australian Risk Management Association, Amundsen is a respected senior executive and brings a considerable amalgamation of property finance experience to Thinktank from institutions such as Westpac, Mirvac and Toronto Dominion.
Thinktank
Per Amundsen
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Per Amundsen
Thinktank
Cory Bannister
La Trobe Financial
Industry experts
Per Amundsen is company secretary at Thinktank. Prior to joining the company, he was general manager at AMP Property Finance, where he built a book of $1.5bn in SME commercial property loans. An executive member of the Australian Risk Management Association, Amundsen is a respected senior executive and brings a considerable amalgamation of property finance experience to Thinktank from institutions such as Westpac, Mirvac and Toronto Dominion.
Thinktank
Per Amundsen
Cory Bannister is senior vice president and chief lending officer at La Trobe Financial. He has a rich understanding of both the loan origination process via the third party channel as well as the approval and settlement of institutional and retail loans. Bannister’s portfolio management experience extends to the selection and allocation of assets for multiple wholesale mortgage portfolios in excess of $1bn. He has been responsible for the management, review, risk profiling and audit of wholesale asset pools; the conduct of relationships with substantial wholesale and retail investors; and oversight of related reporting.
La Trobe Financial
Cory Bannister
SMSFs of between $200,000 to $1m in size have commonly held residential real property, while non-residential has been more popular among SMSFs with over $1m in assets. But commercial overall is seeing more action, partly due to the use of limited recourse borrowing arrangements.
“For example, some SMEs are now acquiring a commercial property through the assistance of an LRBA arrangement as the long-term benefits better align with their ultimate goals of return and capital growth,” says Amundsen.
SMSFs are more immune to some of the headwinds facing property in general that might influence the underlying market.
“SMSFs often hold a substantial portion of their assets in cash, effectively providing a liquidity buffer for when asset returns [such as] rental income in the case of property are delayed,” says Bannister.
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Per Amundsen
Thinktank
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“The financial world is not stationary. Keeping up to speed with the latest news and compliance developments throughout the industry is key”
Per Amundsen, ThinktanK
This drive to self-manage retirement superannuation funding complements the interest in and familiarity with property as an asset class shown by most Australians.
“More people are open to buying property with their super and therefore creating an SMSF … They feel that they'll get better growth potential with property,” says Sanders.
Firstmac offers SMSF loans ranging from $50,000 to $1.5m with both variable and fixed rate options.
“We have a simple application process with an easy-to-understand policy and process with minimal supporting documents required,” says Sanders.
Because Firstmac doesn’t outsource any legal components, it has control of the process from start to finish, which makes it easier for brokers to deal with; it also has lower fees.
“Our Residential SMSF product has the lowest fees in the market, with no application fee, no annual or ongoing fees, no settlement fee and no legal fees for a refinance,” says Sanders.
Per Amundsen is company secretary at Thinktank. Prior to joining the company, he was general manager at AMP Property Finance, where he built a book of $1.5bn in SME commercial property loans. An executive member of the Australian Risk Management Association, Amundsen is a respected senior executive and brings a considerable amalgamation of property finance experience to Thinktank from institutions such as Westpac, Mirvac and Toronto Dominion.
Thinktank
Per Amundsen
Cory Bannister
La Trobe Financial
Cory Bannister is senior vice president and chief lending officer at La Trobe Financial. He has a rich understanding of both the loan origination process via the third party channel as well as the approval and settlement of institutional and retail loans. Bannister’s portfolio management experience extends to the selection and allocation of assets for multiple wholesale mortgage portfolios in excess of $1bn. He has been responsible for the management, review, risk profiling and audit of wholesale asset pools; the conduct of relationships with substantial wholesale and retail investors; and oversight of related reporting.
La Trobe Financial
Cory Bannister
Cory Bannister
La Trobe Financial
Cory Bannister is senior vice president and chief lending officer at La Trobe Financial. He has a rich understanding of both the loan origination process via the third party channel as well as the approval and settlement of institutional and retail loans. Bannister’s portfolio management experience extends to the selection and allocation of assets for multiple wholesale mortgage portfolios in excess of $1bn. He has been responsible for the management, review, risk profiling and audit of wholesale asset pools; the conduct of relationships with substantial wholesale and retail investors; and oversight of related reporting.
La Trobe Financial
Cory Bannister
Barry Saoud joined Pepper Money in July 2021 as general manager, mortgages and commercial lending and is responsible for its strategic direction and operating performance across product, credit and settlements sales functions for Australia and New Zealand mortgages, commercial loans, personal loans and direct sales. With over two decades’ experience in financial services, Saoud has worked in numerous areas across legal, company secretary, sales and product management roles with the likes of Aussie Home Loans, GE Capital, HSBC and Norton Rose Fulbright. Saoud is a passionate leader with proven ability to grow businesses and exceed targets through innovative strategy and effective execution.
Pepper Money
Barry Saoud
Peter Vala has extensive experience in residential, commercial and development finance. He specialises in strategic implementation, leads the Thinktank relationship manager team, and works closely with brokers and aggregators.
Thinktank
Peter Vala
John Mohnacheff is Liberty's ebullient and charismatic group sales manager. With over 30 years of insurance, banking and finance experience, he is committed to improving the sales habits and disciplines of the entire group sales team. Before joining Liberty, Mohnacheff held executive roles at Westpac and Bank of Melbourne. He has a Bachelor of Business and a Marketing Master’s from the University of New England, and a Postgraduate Diploma in Organisational Behaviour from the University of NSW.
Liberty
John Mohnacheff
Source: Australian Tax Office SMSF quarterly statistical report, September 2022
A growing SMSF population
June 2017
Year ended
“The degree by which the SMSF sector continues to be embraced by ordinary Australians is a staggering endorsement of its ongoing value”
Cory Bannister, La Trobe Financial
Property stable as SMSF asset class
SMSF product range
Jake Sanders joined Firstmac in January 2007 and has been head of third party sales since 2017. Over the past 25 years, he has worked in various roles in banking and finance, with experience including loan approvals, credit control, documentation, settlements and sales. Prior to joining Firstmac, Sanders spent five years at National Australia Bank, followed by roles at a finance and conveyancing firm where he obtained his Advanced Diploma of Conveyancing, at Gadens law firm as national business development manager, and at Capital First Financial Services as a senior sales manager.
Firstmac
Jake Sanders
Jake Sanders
Firstmac
“More and more people are looking at alternative options to invest their super in. We also see an opportunity to help reduce the repayments on existing SMSF loans”
Jake Sanders, Firstmac
SMSFs established
5,000
10,000
15,000
20,000
25,000
35,000
30,000
30,282
25,310
20,309
21,696
25,785
28,129
June 2018
June 2019
June 2020
June 2021
June 2022
Windups
Net newly established SMSFs
Click to see more
Total number of SMSFs
Total number of SMSF members
15,025
25,165
17,697
17,280
16,177
7,675
15,257
145
2,612
4,416
9,608
20,454
560,029
560,174
562,786
567,202
576,810
597,264
550,000
562,500
575,000
587,500
600,000
1.055m
1.050m
1.055m
1.063m
1.074m
1.112m
1.0m
1.038m
1.076m
1.115m
5,000
10,000
15,000
20,000
25,000
30,000
35,000
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Proportion of SMSF members by gender and age range
<25
Source: Australian Tax Office SMSF quarterly statistical report, September 2022
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+
Male
Female
Total
5
10
15
20
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Firstmac is an independently owned Australian financial services provider with more than 40 years’ experience in home and investment loans. It has grown from a small family business to become Australia's leading non-bank lender. Over time, Firstmac has provided 130,000 home loans, and it currently manages $16bn in mortgages and $300m in cash investments. Its headquarters is in Brisbane, Australia. Firstmac is dedicated to bringing simple, affordable, competitive financial products to market, underpinned by a lengthy track record of success and a pedigree in prime residential home loans. Firstmac is a premier sponsor of the Brisbane Broncos.
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More brokers needed
Brokers are likely to find potential SMSF clients among their existing customers, and for those looking to enter the market, this source of leads is a low-hanging fruit.
Networking and connecting with professionals who specialise in SMSFs, or talking to accountants and financial planners can also open doors if you can offer a better deal.
“I guarantee that those professionals which specialise in SMSFs have existing customers with these loans on commercial-type rates – it’s a huge market opportunity,” says Sanders.
“I think it’s a good strategy for brokers to start in the refinance market because there isn’t the time sensitivity that there is with a purchase.”
SMSF advice needs to incorporate qualified investment, accounting, auditing, tax and legal advice – brokers who don’t have these qualifications can’t go it alone.
“It’s important to note that unless a broker is licensed, they cannot provide financial advice. However, they can guide their client with various questions to be discussed with their financial planner,” says Amundsen.
SMSFs are highly regulated, and different taxation positions are in play, depending on the status of the fund; its beneficiaries; and the acquisition or sale of assets at different points in the SMSF life cycle.
A broker needs to gather as much information and insight as possible from trusted sources, including BDMs or relationship managers at non-banks. SMSFs may seem complex at first but can be straightforward once the structure is set up correctly.
“Once you are across this market segment, it can be easier than a standard residential transaction,” says Sanders.
Bannister points out that SMSF lending is not as complex as brokers tend to think.
“Any broker who has done a trust loan will find that an SMSF loan is very similar – an LRBA simply involves a trust within a trust. If something does come up during the process that the broker is not familiar with, we can help them through it,” he says.
“The most common mistakes we see relate to the timeline of events, which is a critical component to ensure there are no problems down the line.”
Attending education sessions and asking plenty of questions is one way to build knowledge and confidence as well as stay up to date.
“The financial world is not stationary. Keeping up to speed with the latest news and compliance developments throughout the industry is key,” says Amundsen.
Less complex than many brokers think
As the economy changes gear, savvy brokers are broadening their offerings, and SMSF is a good addition to the toolbox when people are looking to maximise returns on increasingly squeezed assets.
“Some people can only invest this way, and others may see this as a better alternative to their current superannuation fund,” says Sanders.
“SMSF lending is an area you can diversify into in order to be a more holistic service provider to your clients and help protect your portfolio.”
Reset
Age range
0.5%
2.6%
10.1%
8.6%
11.0%
11.7%
12.7%
12.0%
11.9%
15.3%
3.7%
0.5%
2.6%
10.7%
9.1%
11.8%
12.3%
13.2%
12.7%
11.9%
13.0%
2.3%
0.5%
2.6%
10.4%
8.8%
11.4%
12.0%
12.9%
12.3%
11.9%
14.2%
3.0%
In Partnership with
Jake Sanders joined Firstmac in January 2007 and has been head of third party sales since 2017. Over the past 25 years, he has worked in various roles in banking and finance, with experience including loan approvals, credit control, documentation, settlements and sales. Prior to joining Firstmac, Sanders spent five years at National Australia Bank, followed by roles at a finance and conveyancing firm where he obtained his Advanced Diploma of Conveyancing, at Gadens law firm as national business development manager, and at Capital First Financial Services as a senior sales manager.
Firstmac
Jake Sanders
Jake Sanders
Firstmac
As one of Australia’s leading credit asset managers specialising in asset management and credit, La Trobe Financial is committed to making a positive impact on its community. With seven decades of proven credit management behind it, La Trobe Financial has funded over $36bn of investment for more than 229,000 customers. Its investors include large global institutions, Australia’s major banks, family offices, fund managers and 55,000 everyday investors in its award-winning credit fund. La Trobe Financial is driven by one cause – to place “others before self” and make a positive impact by helping people create wealth with specialist and investment solutions.
Find out more
Jake Sanders
Firstmac
Firstmac offers SMSF loans ranging from $50,000 to $1.5m with both variable and fixed rate options.
“We have a simple application process with an easy-to-understand policy and process with minimal supporting documents required,” says Sanders.
Because Firstmac doesn’t outsource any legal components, it has control of the process from start to finish, which makes it easier for brokers to deal with; it also has lower fees.
“Our Residential SMSF product has the lowest fees in the market, with no application fee, no annual or ongoing fees, no settlement fee and no legal fees for a refinance,” says Sanders.
More brokers needed
Jake Sanders joined Firstmac in January 2007 and has been head of third party sales since 2017. Over the past 25 years, he has worked in various roles in banking and finance, with experience including loan approvals, credit control, documentation, settlements and sales. Prior to joining Firstmac, Sanders spent five years at National Australia Bank, followed by roles at a finance and conveyancing firm where he obtained his Advanced Diploma of Conveyancing, at Gadens law firm as national business development manager, and at Capital First Financial Services as a senior sales manager.
Firstmac
Jake Sanders
Age range
<25
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+
Age range
<25
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+
Age range
<25
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+
Age range
<25
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+
Age range
<25
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+
Age range
<25
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+
Age range
<25
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+
Age range
<25
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+
Age range
<25
25-34
35-44
45-49
50-54
55-59
60-64
65-69
70-74
75-84
85+