In a recent episode of the Accountants Daily Insider podcast, SuperConcepts’ executive manager of SMSF technical and private wealth, Graeme Colley, said ASIC’s fact sheet “Self-managed superannuation funds: Are they for you?” may have unintentionally misled consumers around the level of super assets they needed for an SMSF set-up to be worthwhile.
“What we saw [in the fact sheet] was numbers coming up because numbers are easier to understand,” Mr Colley said.
“When we saw superannuation funds with more than $500,000 [in the statistics] people thought that was their balance rather than the balance in the superannuation fund. But when you split that down, you’re looking at balances of around $250,000.”
The fact sheet, which ASIC said aimed to get trustees to consider whether an SMSF was appropriate for them, stated that SMSFs with balances below $500,000 had lower returns on average than industry and retail super funds.
However, as the majority of SMSFs have two members, this would equate to an average member balance of around $250,000, meaning the appropriate client base for SMSFs had not changed drastically over time, Mr Colley said.
“If you go back to what ASIC was saying many years ago, that a fund with around about $200,000 in it was appropriate to set up a self-managed fund and run it,” he said.
“So, I don’t think that’s changed greatly in the number that you’re looking at there with $200,000 or $250,000 per person. That seemed to lose a bit in the story itself, the way in which that came across.”
Mr Colley added that he agreed with comments made by the SMSF Association and other industry practitioners that the headline annual running cost of $13,000 quoted in ASIC’s fact sheet was a gross exaggeration.
“We’ve certainly got clients who’ve got very, very large self-managed funds who would have fees in that range, but for the majority of people in the ones we look after, they’re much lower than that because the costs of the audit and the costs of the administration is relatively modest,” he said.
“The peak service that we provide is around $5,000, and that’s a full daily arrangement that we’ve got in place for those clients.”
Perhaps the same criteria should be applied to ASIC as apply to financial advisers: when providing false and misleading information they should be banned.
My SMSF has three members and a total annual ‘admin’ cost for tax return, audit, and member statements of just $900 ($300 per member) plus the ATO ‘levy’ that provides zero benefit/service (“fees for no service”?). We’re invested 10% in a high interest online savings account (nil mgt fee) and 90% in a diversified index ‘fund of funds’ that has a mgt fee of 0.29% for the balance over $100K, so our overall mgt fee comes in around 0.5% and the admin fee at around 0.06%.
While it is entirely possible to overpay for SMSF service fees and to invest in speculative (eg. one real estate property) or inappropriate and underperforming assets (eg. 100% cash), that is surely an issue with trustee education and decision making, not SMSFs per se?
For the ASIC ‘Fact Sheet’ to propagate what for many SMSF trustees in essentially a misinformation campaign (not applicable to the majority of SMSFs) is unethical and unprofessional. And since when did past performance become a reliable indicator of future returns, as the ASIC calculations seem to imply?