No problem with free SMSFs, practitioners say
The concept of free SMSF set-up is not problematic and can be a valid marketing tool, according to several SMSF practitioners.
Provided the terms and conditions are appropriately disclosed, the concept of a free SMSF set-up offering is not inherently problematic, Heffron’s managing director Martin Heffron told SMSF Adviser.
“I think it’s just important to be aware of what you’re paying for; there’s no such thing as a free lunch,” Mr Heffron said.
“There’ll be different business models that generate their margin in different ways. [Hypothetically speaking] you might have a free SMSF set-up as part of a deal that puts you into a low-cost admin product… but for that low-cost admin product, you have to use other financial products.
“From the consumer’s perspective, it’s important to understand the totality of whatever the business model is.”
Xpress Super and SuperGuardian chief executive Olivia Long also said the concept of a free SMSF is not “fundamentally” problematic if a quality service is being provided and appropriate disclosures are provided.
“There are a number of good SMSF administrators out there who have a quality service, who want to be able to promote themselves to trustees [but] that don’t have the advertising or marketing expense account that [a larger institution] does,” Ms Long told SMSF Adviser.
“It’s a cost of sale really, it’s a marketing expense and as long as there’s a quality service behind it I think that’s reasonable.”
These comments follow SMSF administrator SuperHelp’s payment of a $10,200 infringement notice penalty after the company made “potentially misleading statements” about the cost of setting up an SMSF.
ASIC’s concerns related to an advertisement SuperHelp published in the October 2013 edition of the Australian Financial Review’s Smart Investor magazine, according to the statement.
“The representations were that fund set-up was free and that pension fund set-up was free, subject to ‘*conditions’. No conditions were disclosed in the advertisement,” ASIC stated.