In an exclusive interview with SMSF Adviser to be published in the upcoming February print edition of the magazine, CleverSuper chief executive Chris Appleyard said the SMSF administration market is in need of “revolutionising”, particularly on the regulatory and licensing fronts.
Mr Appleyard said greater “disclosure and consumer protection mechanisms” are required in the SMSF administration market, and that making SMSF admin tools beholden to an Australian Financial Services Licence may be an appropriate course of action.
“If it looks and feels like a financial service or product, it likely is,” said Mr Appleyard, who licenses his SMSF admin business, CleverSuper, as an authorised entity of his financial planning dealer group business, Custom Wealth Solutions.
As well as a lack of appropriate licensing requirements, the SMSF administration market is plagued by conflicts of interest, Mr Appleyard said, whereby larger vertically integrated institutions can use the tools to restrict the number of financial products available to trustees.
“SMSF admin providers have the ability to simply say ‘we cannot support that fund, or that product’,” he said.
“Similar to a mastertrust or wrap, if the product is not available on the platform then it‘s simply not possible. [This] is worrying because anyone who chooses to have an SMSF is doing it to have more control over the products it can use.”
Describing this ability for SMSF administrators to restrict product choices as “back to the future”, Mr Appleyard said a paradigm shift was needed and that the “$20 billion” in fees paid to SMSF administrators is unnecessary.
“The message needs to get out there [on] prime time television so that [SMSF trustees] know they don’t have to pay fees anymore,” Mr Appleyard said.
“They can take back control and manage their investments their own way and make all these industry people – advisers, banks, institutions – make them all compete for their business and disclose what they are providing, rather than giving it by default.”
Version 3 of CleverSuper – which has previously polarised SMSF Adviser readers – will be ready for launch by mid-2014.
Hold on!
Are we talking about Self Managed here?
Where is the self management by Trustees.. if he has to hire / financial planners / administrators / tax agents etc…
Wait for next generation cloud SMSF accounting packages, which are currently being built – where there will be no need of an accountant or an administrator or a tax agent – Trustees will log in to their cloud account where banks and brokers will feed in data […]
The big boys? Please. Clever Super with their paltry number of SMSFs is who exactly ……
I was only just thinking this country needs more regulation, complexity and compliance, we simply don’t have enough of it already. Lets be real the growth in complexity and compliance strangles innovation, adds costs and makes Australia more uncompetitive, hence the growth in off shoring (read transfer of jobs to other countries).
As usual its the big boys with the big balance sheets and the loss leaders who cross subsidise their no or low fee (read uncommercial) offerings with the trails from the financial products the clients are compelled to take under these arrangements.
Curiously the people who promote the low fee offers usually have contracts that are similar in spirit to the Telco’s. Ie read the fine print!!! Same people who also state that we need more regulation and licensing.
Hopefully the recent change in government will halt the advance of over compliance and return some commercial reality to this country.
As usual the bigger boys want to add to the costs and compliance issues of smaller SMSF so as to keep more business for themselves.
This is complete nonesense SMSF administrators are providing an accounting service not a financial product if they need an AFSL then why don’t we require every accounting practice to have one? it is bloody ridiculous to suggest this, if an insto limits access to investments via its SMSF service then another service !!!
[quote name=”Colin”]I do all my own administration. Would this mean I need a licence to continue doing that?[/quote]
To clarify my point, licencing would only apply to advisers (ie those supporting trustees). If trustees choose to do their own administration then that is quite correctly their choice. The fund auditor. The only professional adviser in this instance would be the auditor.
Totally agree with Karen! Thats one reason why SMSF are great vehicles because the trustee has a greater say in who administers their fund.
Regulation of SMSF administrators is appropriate only if improves controls/segregation of duties & manages or mitigates risks and generally improves industry governance. It should not be done just for the sake of it.
In my view, one of the biggest risks to the market / clients assets is conflict of interest – for instance between administrator & and product provider.
If regulation/licencing introduces best practice disclosure standards […] which require full disclosure of potential conflicts of interest – for instance around fees/subsidies received by administrators from product providers, or of referral relationships/fees to/from other parties – I am all for it.
This move would be in the clients best interests & improve transparency & hopefully long term credibility and reputation of the industry…
I do all my own administration. Would this mean I need a licence to continue doing that?
What next, licensing bookkeepers?
An interesting concept. This was called for by a number of groups in the Cooper Review submissions. Instead of licencing the administrators the Cooper Review recommended the licencing of auditors. Upon the implementation of this recommendation the industry has seen approximately half of the SMSF auditors leave the industry.
Given the greater compliance costs of having an AFSL you would be likely to see a similar number of practitioners leave the administration area.
For me SMSFs should be a specific AFSL product (ie separate from the generic superannuation product), all practitioners (administrators/planners/accountants/auditors) should all have specialist accreditation/licencing. Overall this will significantly improve the quality of advice in this sector.
[quote name=”karen”]If they don’t want to be restricted its easy – don’t use the provider and use a provider where the fees may be more but the choice is available! Simple![/quote]
I think Chris’s point is that people should know that there are low cost offers out there that DO NOT restrict the choice of investment/platform.
In my opinion it is up to the Trustee and their Advisers to research the market. I find that in reality many Trustees start shopping around after 1-2 years of experience rather than at the outset.
I agree it is all about choice. BUT people can choose to use a particular administrator and receive a cheaper fee resulting from the restriction. If they don’t want to be restricted its easy – don’t use the provider and use a provider where the fees may be more but the choice is available! Simple!