Late last week, ASIC released new SMSF advice guidance, which made clear ASIC’s view that an SMSF with a starting balance of $200,000 or below is unlikely to be in the client’s best interests, and that advice to establish one below that threshold is more likely to be scrutinised by ASIC.
Townsends Business & Corporate Lawyers disputes ASIC’s view on several grounds, pointing to the benefits SMSFs can have – irrespective of balance.
The law firm noted first that SMSFs allow for a level of certainty when it comes to estate planning. For example, trustees can make a specific type of binding death benefit nomination that may not be allowed via a public offer fund.
Trustees can also ensure their death benefit does not become subject to a public offer trustee’s payment policy.
Townsends also pointed out that only via an SMSF can a member decide which life insurer they want to use and pay via tax-deductible super contributions.
The firm also noted there are certain strategies that are not available via public offer that can give a “massive boost” to long-term retirement income, such as LRBAs to buy direct shares and property.
“It’s not about how much is in the fund now; it’s about how much will be in there long term for retirement, plus, where the fund holds life policies, clearly the balance of the fund on a member’s death is potentially going to be much more than the starting balance,” Townsends stated.
“ASIC’s focus on short-term costs is simply naïve – it effectively says it is better to pay 2 per cent fees in a public offer fund that yields a 5 per cent return in the long run compared to say 7 per cent fees in an SMSF that yields 20 per cent returns over the same period.”
Finally, Townsends said that most SMSF members set up an SMSF for the control it allows them, irrespective of the balance of the fund.
“That desire for control is as valid a reason for having an SMSF as any other,” Townsends stated.
I recall a FOFA public hearing where the Treasury official was responding to the audience comment that insurance commissions were important for those who could not afford insurance on a fee for service basis, exactly the uninsured masses the Govt wants to bring services to.The officials suggestion as to how would such clients pay a fee for service if there were no commissions was “cant they just put it on their credit card?”! Riotous laughter ensued. Then the official agreed to a personal question from the audience, “have you always been in the public service & is all your super in a Govt defined benefit fund?” The sheepish answer was of course “yes”.My point is that as long as Public servants in Treasury or ASIC continue to draft financial planning policy, which they clearly do not understand or have any commercial and real life experience in, the public will continue to lose important freedoms & opportunity that let them adequealtly plan for their retirement and family’s future.
Well said. It couldn’t be that ASIC is highlighting the Govt’s dislike/bias against the principle of SMSFs! Could it?
Well said.