In comments made to SMSF Adviser, Olivia Long, CEO of XpressSuper and Superguardian, spoke of her “surprise and dismay” upon learning of comments made by ASIC in which the regulatory body stated “the costs of establishing and operating an SMSF with a balance of $200,000 or below are unlikely to be competitive, compared to a fund regulated by APRA”.
Ms Long said she disagrees both with the ASIC statement and the regulator’s decision to make such a comment.
“There is simply no evidence that SMSFs with balances of less than $200,000 are run less efficiently than their wealthy counterparts,” she said.
Ms Long also made particular reference to the 2010 Cooper Review and the 2014 Financial System Inquiry which both looked at setting a minimum balance as a pre-requisite for establishing an SMSF.
“After examining all the evidence, neither of these vigorous inquiries thought there was any merit in the suggestion,” she said.
Despite prior investigation into the matter, “the thrust of this ASIC edict is self-evident: they want to discourage people to set up a SMSF with a starting balance of $200,000 or below”, Ms Long claimed.
“It seems the conclusions of two inquiries is not enough for some people,” she added.
Quick to point out there is a lack of attention and appreciation for those who are taking superannuation fund management into their own hands, Ms Long said “people adopting such a responsible approach to their superannuation should be encouraged”.
The SMSF sector, boasting approximately $600 billion in FUM, has frustrated the retail and industry funds, she said, as they deal with a large migration of members away from their services as they edge toward retirement.
While noting that ASIC has in the past effectively targeted spruikers and advisers who prey on the vulnerable, Ms Long reiterated that the regulator should maintain a strictly regulatory role.
“It is not ASIC’s role to enter the debate about the parameters of which the SMSF sector operates,” she said.
[quote name=”Ramani”]Ross
On this logic, all planners must be shot because of TRIO. Not the way.[/quote]
Hate to tell you Ramani – all other advisers HAVE been shot because of TRIO – and Storm and CBA Financial Planning etc.
While the advice industry itself has to take blame for these incidents, the job of ASIC is to prevent these things from happening.
In ASIC’s defence, they are subject to the whims of government funding. But have a look at the number of red flags that were raised on Storm for years before they went belly up. And ASIC basically ignored them all until the maximum possible damage had been done.
They DO have limited funding – so why are they wasting it on a random item such as SMSF’s with balances below a certain amount when there are so many other areas they could/should concentrate on?
[quote name=”Ramani”]Ross
No government agency is immune from ministerial portfolio oversight, let alone ASIC with responsibility for market the relevant Hansard minutes.
its mandate is simply counter-productive. On this logic, all planners must be shot because of TRIO. Not the way.[/quote]
You are 100% incorrect I know from personal experience ASIC are NOT responsible to any Minister – if they were then one could go to the Minister with issues but as there is no one basically in charge they are in charge of themselves…
We need a body like ASIC but one that had a clear charter and is made responsible for their actions and be accountable
[Comment was edited]
Re Rob’s comment (#3), I started my SMSF with a balance of about $25,000. At the time the retail fund I was with was charging me about 1.5% (about $375). On top of that it managed to consistently lose between $200 and $1200 per year, from 2008 when I arrived in Australia until 2011 when I got the SMSF.
I use accounting software that is free for funds with balances of less than $150k (which mine still is). Except for my time, my only costs are the ASIC levy ($259 this year), annual company renewal for the Trustee ($45) and the cost of the auditor ($330) plus a bit of printing which I pay for personally. Total cost is $634. I would only need a balance of $42667 to pay that to my old fund in fees, even before I consider the money they lost.
While it’s definitely not for everyone, I don’t see any reason why small balances should be a barrier to entry if the Trustee is happy to do a lot of the admin work.
And Rob, why should balances be mandated? Because you think so? What if its what the client wants? What if its a couple and they have $160K and can contribute $20K pa apiece and they want to buy the premises they operate from? Should they be made to wait under your directive or can they move now, as is their choice? What if the person has a good investment opportunity and their super is their only available source of investment capital? Is that just too bad for them because the fees are too high, despite the fact that they perceive this to be acceptable in expectation of the potential returns?
Ross
No government agency is immune from ministerial portfolio oversight, let alone ASIC with responsibility for market conduct, consumer protection and corporations law. The Assistant Treasurer usually holds this charge. In addition, our Senate Economics Committee inquiries (periodical and on particular topics) are not backward in tearing into the entrails of administrative agencies, see the relevant Hansard minutes.
Like every other human system, ASIC has fallen short. But dismissing its mandate is simply counter-productive. On this logic, all planners must be shot because of TRIO. Not the way.
Sounds like the bods at Union Super have been having a word with their mates at ASIC. Surprised CHOICE haven’t chimed in as well.
I had cause to look at the MoneySmart calculators on the ASIC website yesterday, what a joke that is. While fees are an important consideration in whole investment/wealth creation piece, they are not the only consideration. The MoneySmart calculator was basically only concerned with the amount of fees you would pay. No discussion of returns, diversification, strategies, goals or planning. Just fees.
ASIC do not report to any Minister and basically are unaccountable, the only conversation should be about a Royal Commission into ASIC handling of the CBA/FINANCIAL WISDOM scandal, and a change so ASIC reports to a (Finance maybe) Minister and has a clear and concise charter of their role and responsibility. At the present time ASIC contribute more to fraud through their own incompetence than they do to preventing it!!
Methinks Ms Long takes a very long bow in objecting to ASIC having a view on optimal minimum balance for SMSFs and daring to articulate it.
Our super jungle crawls with beasts of various kinds occupying the food chain: from disengaged and semi-literate members at the bottom, through fee-grabbing advisers very engaged but not much more literate, outsourced providers with all care and little responsibility, to regulators blamed (often justly) for too much, too little and nodding off at the wheel – it teems wild life. Getting wilder.
If mere product peddlers masquerading as altruistic advisers can shoot off on any super topic superciliously, why not ASIC?
Note this was not an ASIC edict, but just a view – not enforceable. Do we want unthinking automatons as regulators?
Stifling debate is a recipe for sudden death.
[quote name=”Rob”]Wait until it is legislated (as is should be).[/quote]
The legislation is already in place – it’s called Best Interests Duty. ASIC have proven to be singularly unable to enforce this – as your own comments prove.
The arguments against this proposed measure are that (a) there is NO legislation regarding minimum balances for ANY type of fund (including retail and industry funds) but ASIC is introducing de facto legislation for one type and (b) the idea that fees are the only relevant factor actually ignores BID.
I don’t recommend SMSF’s for many clients but I don’t automatically count them out because of one factor either.
ASIC’s role is to enforce the existing rules – not to make their own up. The government sets the rules – not ASIC.
It may not be “ASICs role to enter the debate about the parameters of which the SMSF sector operates,” but it is ASIC’s role to regulate financial advice. The $200,000 figure was in the context of guidance by ASIC to financial planners giving advice around SMSFs. It explicitly said that SMSFs under $200,000 may be appropriate in some circumstances, but that ASIC is likely to take a closer look at advisers recommending people start SMSFs with low balances.
The problem is that SMSFs have been classified as a “product” for the purposes of Corps Law and therefore, ASIC can, and will continue to, stick its oar in.
Shame on the Accounting bodies and the so called SMSF lobby groups for not prosecuting the case better that SMSFs are an INVESTMENT VEHICLE.
There may well be “products” housed in a SMSF but not always – as is the case with direct property.
Put another way, is a family trust a “product” because it has an equities portfolio? Of cause not and, likewise for a SMSF.
When you look at the language used in the whole “Financial Services Reform’ project (now into its 11th year), its clear to see what groups caught the ear of the policy designers. Had they spoken to Accountants, SMSFs would have had a much more sensible carve out etc.
I think the ship is now impossible to turn so it will only ever be incremental improvements that can be achieved.
The incongruence has come too late.
I read recently, in this publication, where a SMSF provider was fined by ASIC for suggesting that SMSFs provided better returns than industry funds. “False and misleading”, apparently.
Now we have ASIC saying that SMSFs are unlikely to be competitive with industry counterparts where balances are less than $200k. Pretty broad statement, methinks, that is apparently NOT “false and misleading”.
Given that many people leaving industry funds to start their own SMSF would probably do so with balances around $200k (or less), it’s not hard to spot the agenda is it.
The regulator is “slammed” for getting involved in the discussion. Seriously…. because it’s not something you want to hear, you lambast them. I’m no ASIC fan by any stretch of the imagination, however to “suggest” that they should not have their say is ludicrous. Wait until it is legislated (as is should be). Only vested interests push the “it’s feasible” argument. I’ve seen some disgusting things with small balance SMSF’s and it is only been prone with these. Stump up and accept that low balance SMSF’s are not in the client best interests. I’d like to see the argument to be put up given the changes on that front.
Agreed. I liked the article written by a lawyer who also stated that NOT recommending an SMSF if the balance was over say $500K was negligent! Its ridiculous to put numbers on this. I think they are just worried about how they are going to audit all the SMSF’s in the future if the number keeps growing the way it is now and superannuation becoming such a large asset in terms of people’s wealth.
Based on the idea that a SMSF with under $200k will be more costly than a larger fund, I’ll be interested to see how ASIC goes investigating every advisor who recommends a retail fund over an industry fund. If retail funds cost more than industry funds then, based on ASIC’s rationale, clearly the advice is bad. Of course the rest of us, apart from some lobbyists, know there’s more to a decision than just fees.