- A look at how as our ageing population grows, so too does the need for SMSF management support from advisers due to member incapacity
- The SMSF sector must keep up with technological change
- SMSF professionals can bridge the gap between the complexity of managing SMSF and member incapacity
Matthew Burgess, Author and Director of specialist law firm View Legal, shares his insights on the issues that can arise in regard to member incapacity in the SMSF sector and what SMSF professionals can do to best advise and support their clients.
The implications of an ageing population
In 2017, Australians aged 65 and over comprised 15% of the total population, representing a significant increase from just 5% in 1927. Looking forward, this figure is expected to grow to 22%, or 8.8 million Australians, by 20571.
Reflecting on these numbers, Burgess believes they create a perfect storm. As the population continues to age, individuals' mental incapacity grows and so too does their need for support in managing their SMSF.
"It's becoming one of the fastest growing areas of the law. People have a lot of money tied up in SMSFs and now that they're living longer their mental health is often degenerating. Ten years ago, elder law and abuse didn't really exist, but now the need to protect our ageing population has increased substantially," Burgess says.
"Many individuals already have a gap in understanding SMSFs and need support from advisers and professionals. When you factor in mental incapacity, the issue becomes even more serious," he reveals.
The SMSF professional's role in protecting members
Burgess states in order to combat changing needs in the SMSF industry, government regulation has constantly evolved leading to tighter restrictions for the benefit of members. However, he suggests this added level of complexity contributes to the issues at hand rather than resolving them.
"When you look at the industry, in its current form it's only about 30 years old. That's a relatively short period of time and when you see the additional regulation and legislation, its already become fragmented," Burgess asserts.
Burgess suggests in order to assist trustees with a mental incapacity, professionals need to ensure they're educating them on their funds and preparing them for the responsibility of managing them, including maintaining the correct documentation.
He reveals while the industry is being forced to constantly evolve due to technological change, it has yet to completely adapt to the new digital era.
"Documentation is critical, especially in the estate planning stage. But what's interesting is the legal sector is behind in terms of adapting to how documentation is managed. Estate planning is essentially still without exception reliant on pen and paper. That's how archaic that part of the industry is," he says.
Burgess argues professionals need to actively adapt to and adopt new technologies in order to create a more effective process - underpinned by due-diligence - for all parties long-term.
"Not only should lawyers and finance professionals be leaning on technology to manage processes, they should also be sharing their knowledge with trustees where they can. In the past, advisers have been perceived as keeping information within their firms but if the culture was to instead share knowledge and educate trustees, that could be of real benefit," he says.
The future of SMSF regulation
Burgess believes as the industry evolves, an individual's home will no longer be their primary asset. Instead, for many, superannuation savings will be their biggest asset – indeed this is often already the case.
"As people live longer there will inevitably be a compounding of their wealth within super. With the government regulations in place, it means for many - even if they wanted to - they wouldn't be able to spend all the savings in their SMSF prior to death" Burgess argues.
"But to me, SMSFs are already the centrepiece of what the estate plans for many people need to be focused on and I can only see that increasing exponentially with the aging population. Therefore, it's incumbent on advisers to assist individuals early on so they remain well informed," he says.