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uperannuation trustees and financial advisS ers must beef up their expertise on cryptocurrencies and non fungible tokens as both start to gain ground with SMSF investors. Non fungible tokens, or NFTs, have been dominating headlines recently as everyone considers the potential applications and implications of the new technology. For some it may seem silly but for others, like BTC Markets chief executive Caroline Bowler, the adoption of NFTs is the way of the future. “It’s about ownership. It’s the same as any piece of art that is sitting in a gallery anywhere. You can buy reproductions of the Mona Lisa until the cows come home, but the Louvre will still own the original,” Bowler says. “I think we’re going to see in five years’ time these things are going to be so mainstream that we’re going to wonder how we managed without them.” And controversial technologies turning mainstream may very well be true. Releasing SMSF data for the 2018/19 financial year recently, the Australian Taxation Office (ATO) published the amount sitting in cryptocurrencies for the first time, estimating SMSFs hold about $140 million. While that is still a far cry from the $158 billion in cash and term deposits, it is a sign that as we progress these technologies are gaining legitimacy. “In 2020 we saw a five-fold increase from the start of the year to the end in terms of the number of new accounts being opened,” Bowler says. “And to dive a little deeper; from August to November, we saw a doubling and then from November to February of this year we saw another doubling. So, there is a very strong upward trajectory.” It’s not just the number of accounts being created, but also the way in which SMSFs are investing in cryptocurrency that is changing. As Bowler explains, the past perception was that an SMSF investor would purchase a cryptocurrency as a once-off and hold the position, but this is changing. “We’ve seen an increase in activity in SMSF accounts actually trading on cryptocurrency, not to the extreme of a day trader, but there is more engagement with digital assets than we would expect to see with SMSF account holders,” she said.
Additionally, Bowler said the data BTC Markets has collected points to the fact that SMSF investors are not always necessarily interested in just the ‘big name’ cryptocurrencies but are also looking into more niche offerings. “There seems to be this appetite to buy into more alternative assets by SMSF investors. You’d have to do quite a bit of research to trade in these particular assets,” she said. “These are not what you’d typically expect to have found. There is this perception of the SMSF investor being quite a cautious type, but that’s just not what we’re seeing.” While the change in trend is interesting, Verante director and SMSF specialist Liam Shorte warns that SMSF investors need to properly understand the risks of any investment. “The majority of people investing in the cryptocurrency space are from the IT sector, they understand blockchain, they’ve done their research,” Shorte explained. “They’re taking measured risks on investing in the area. So, they have a lot more confidence than even me as an adviser who is still learning about that sector.” Shorte said there is no inherent problem with SMSF investors looking to put their retirement savings into cryptocurrencies if they do understand it, but for those that don’t it may not be worth the risk. “It has been a lot more rapidly accepted over the last few decades, but I think people need to sit down and remember this is their retirement funding, they are the trustee for their super fund,” Shorte said. “This is why the ATO has come out so strongly on new requirements for the SMSF investment strategy that they must deliberate on risk, diversification, liquidity. This money is for retirement, not to be taking a huge gamble with.” Shorte also offered a warning to other advisers dealing with clients investing in cryptocurrency or considering doing so, saying clients must know that honesty is the best policy. “In some of these cases in an SMSF one partner is driving the investment strategy… they really need to explain to their spouse what it is they’re doing and the risk they are taking,” Shorte explained. “Because they are partners they are jointly liable for the investment strategy.” fs
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Matthew Pilcher PPS Mutual
SMSF Association Conference
Crypto, NFTs add risk to SMSFs Eliza Bavin
22 March 2021 | Volume 19 Number 05 www.financialstandard.com.au 20 January 2020 | Volume 18 Number 01
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Julia Lee Burman Invest
Adviser levy to increase by 160% Elizabeth McArthur
Caroline Bowler
chief executive BTC Markets
ASIC has hit financial advisers with the news that levies will increase by the equivalent of 160% over two years, with industry bodies outraged. The total cost levied by ASIC is now $1500 per retail advice licence, plus an additional $2426 per authorised representative under the licence. A sole practitioner would now have to pay $3926. The cost was previously $1500 per retail licence plus $1571 for each additional adviser. Chartered Accountants Australia and New Zealand, CPA Australia, Financial Planning Association of Australia, Institute of Public Accountants and the SMSF Association have now joined forces to slam the hike. They claim the steep increase – during a time when the financial advice sector is losing thousands of advisers a year (just over 20,000 remain on the ASIC Financial Adviser Register now) – highlights issues with the funding model and will cause more advisers to exit the industry. The group says the funding model doesn’t Continued on page 4
Aussie REIT returns struggle Karren Vergara
Australia’s listed property sector continues to languish from the effects of the global pandemic, slumping 14% compared to its preCOVID-19 performance. Rainmaker’s Wholesale Managed Funds Performance Report found that equities delivered a mixed bag of returns in the month to January 2021. Listed property lost 4% over the month, while emerging markets came out on top with 3.7%. Returns in the combined property category in the three years to January 2021 topped 13.3% p.a. for the Australian Unity Diversified Property Fund, which is an unlisted fund that owns 11 properties nationwide in the sectors of retail, office and industrial. The Lendlease Australian Prime Property Retail Fund came in second, returning 12.1% p.a. This fund, which is similar to Australian Unity’s fund in that it directly owns 11 Australian properties Continued on page 4