Advisers scared off SMSFs to the detriment of clients

“ASIC does a really good job of telling people what the downsides and risks are with an SMSF. What we’ll be trying to do in this session is balance that, and remind people of all the benefits of an SMSF,” Ms Heffron said.

“ASIC discusses a lot of red flags or caution areas that advisers should be aware of before recommending an SMSF, but it’s one thing to be aware and another thing to run scared because ASIC has made it sound like the circumstances would be extreme before you recommend an SMSF, whereas I don’t think that’s what ASIC meant to do.”

The ATO as regulator, she said, has generally expressed that SMSFs are well regulated and a good structure for the right people.

“It’s just a shame that ASIC and licensees have probably put advisers off using them in a lot of circumstances where they’d actually be ideal,” she stated.

Ms Heffron said it is important to also remember all the benefits that SMSFs can bring.

“A big one that we often talk about is that it’s a platform that follows you throughout your life and evolves with you as your needs evolve,” she said.

“If I picked up what I thought was the most appropriate public super fund for my needs today, it’s highly unlikely to be the right one in 30 years’ time when I’m 80 if for no reason that it possibly won’t exist.”

This means that, at some point, the individual is either going to want to move or be forced to move, she said, which will cause disruption.

“[For example], if I chose to move, the super fund will effectively sell all my assets, so I’ll pay capital gains tax if I haven’t moved to pension phase yet, or if I’ve got special grandfathering, then I’ll lose that. That could simply be the result of changing advisers who use a different investment platform to what the previous adviser did,” she said.

“In an SMSF, you can manage those changes much better. The great example that often comes up is with the Commonwealth Seniors Health Card.”

Ms Heffron noted there have been recent AAT cases where a member moved super funds, and because they moved super funds, that effectively ended a pension that was grandfathered to a new one that wasn’t. The new pension therefore counted towards the Commonwealth Seniors Health Card income test, whereas the old pension didn’t.

“Now in an SMSF, you can change advisers, investments or accountants, do all of those things, but leave your pension in place if you wish so it’s much easier to hang onto your grandfathering without being forced into changing things,” she said.

“I wonder how many people are trapped in legacy products that are now much more expensive than everything else, but they can’t move because, if they do move, they lose that grandfathering. Whereas in an SMSF, you don’t, because you can change certain aspects without changing superannuation vehicle.”

Meg Heffron will be exploring this topic in further detail at the upcoming Super Intensive Day being hosted by Heffron on 5 November 2020.

The all-day virtual event will feature a diverse range of speakers including technical specialists from Heffron as well as guest speakers Scott Hay-Bartlem, Nidal Danoun, Bryan Ashenden and Neil Sparks.

Presenters will discuss a range of topics during the live virtual event including strategies and key points to consider from the federal budget, emerging hotpots with SIS and NALI, challenges around residency and family law settlements, ethics requirements and much more.