SMSF trustees ‘ships without rudders’, analyst claims
One financial services analyst has suggested practitioners should be aware a majority of SMSF trustees lack the skills and knowledge required to make appropriate investment decisions and are vulnerable to misinformation.
Speaking to SMSF Adviser, Wealth Within chief analyst Dale Gillham said while there tends to be plenty of information available on meeting the compliance requirements of running an SMSF, trustees' investment knowledge “isn’t anywhere as high as it should be”.
“Whilst I don’t necessarily think education should be mandatory, I think there needs to be checks and balances undertaken by accountants and advisers that ensure a trustee is qualified to run an SMSF,” said Mr Gillham.
“Every SMSF has an accountant or an auditor so perhaps they should be the ones to suggest the trustee receive training if they feel the trustee doesn’t have the skills they need.”
Mr Gillham said that in more than 20 years working as an analyst, he has seen a vast majority of investors consistently make mistakes due to a lack of knowledge, which inevitably impacts upon their returns.
“This is currently happening in the super fund world; people are setting up portfolios and doing things that shouldn’t [be done] simply because they have a lack of knowledge,” he said.
“They tend of be like ships without rudders doing whatever others tell them to do rather than making their own informed decisions.”
This lack of knowledge, he said, is also leaving trustees exposed to some of the more unscrupulous people who target SMSFs for their own benefit.
“The average Australian doesn’t do a lot of research. They don’t read PDSs, and only look at the return rather than the risk on that return, they don’t research different products or providers, and they are at that much greater risk because of it,” he said.
“Getting people to understand what they’re investing in has been a big challenge in the financial services industry – people put their money in places they don’t understand all the time.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.