More consumer protection laws tipped for SMSF sector
A large influx of ‘mum and dad’ investors entering the SMSF space could see the government tighten investment restrictions for SMSFs, a chief executive of an advice firm has cautioned.
MGD Wealth chief executive John Barton said the growth in popularity of SMSFs in the past few years has seen a lot of people who don’t need one, or want one for the wrong reasons, establishing an SMSF.
“The more that relatively unsophisticated [investors] end up in the SMSF space, the more likely we’re going to have people who don’t really understand their obligations as a trustee. Therefore politicians will feel like they’ve got to protect these people,” he said.
“Over time we’re probably going to end up with investment restrictions and that will end up limiting the options of trustees at the more sophisticated end unnecessarily.”
Mr Barton said the restrictions could involve restricting SMSF trustees from investing in more complex assets, which would likely only add to the complexity.
While Mr Barton supports consumer protections in certain areas such as fraud, he said he wasn’t convinced that if investment restrictions were to be implemented by the government that they would be in the interests of people who should be in SMSFs.
A better solution, he suggested, would be to better educate trustees to the point where they’re comfortable with their obligations or move them to another vehicle.
“Unless you really understand what being a trustee means by definition, you really shouldn’t be one,” said Mr Barton.
“People who go through the motions and sign off minutes at the end of every year but they haven’t actually held a meeting and they don’t actually know what they’re signing, I would argue shouldn’t actually be trustees in the first place.”
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 has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.