Earlier this year, the Productivity Commission said it was concerned about the high cost ratios for lower-balance SMSFs and suggested that SMSFs with less than $1 million were not competitive against retail super fund offerings.
This suggestion has already been met with substantial criticism by the SMSF Association and other prominent groups who’ve since highlighted issues with the comparability of data between public offer funds and SMSFs and the various reasons clients have for setting up SMSFs.
The BGL SMSF Insights Report, conducted by Bstar and commissioned by BGL, indicates that the over half of the professionals in the survey or 55 per cent, consider $200,000 to $400,000 to be an appropriate starting balance for an SMSF, in line with ASIC’s guidelines.
A quarter of respondents or 25 per cent consider between $100,000 to $200,000 to be an appropriate starting balance, while only 3 per cent would recommend establishing an SMSF to a client with a balance below $100,000.
Conversely, only 17 per cent believe a client should have $400,000 or more in order for an SMSF to be appropriate.
Only two respondents nominated $1 million as an effective balance minimum for the establishment of an SMSF, in line with the Productivity Commission’s views.
It depends on what you invest in – pick the right stock and you may get a 10-bagger or 30-bagger. I started with 120k in 2001 and my SMSF is now >$1 million – and it even halved in the GFC – and then recovered higher.
Well said!
ASIC sat down with consumers, including the SMSF Association and also the accounting, financial planning and SMSF professional bodies and came up with a well thought out guideline that $200K was the mark for establishing a SMSF. Jeremy Cooper argued many years ago that the engagement factor of a SMSF for its members compared to industry and retail funds may see SMSFs as the standard by 2050. The Royal Commission is highlighting the fees on fees on fees of industry and retail super compared to the transparency of SMSF fees. ASIC got it right and really all members with super balances of more than $200k that can be combined with a spouse’s super should be shown and educational video on Why SMSFs.
Its all about the client’s purpose and needs. Numbers mean nothing,really, in this context. Getting fixated on a metric that flies in the face of what is best for the client is silly. Sure, a client would be paying more in fees than a public offer fund in many cases. Yet if they want physical property or artwork or whatever, they are willing to pay more for that flexibility of investment. Stop this cookie cutter approach to SMSF. It does not work. Unless of course, you don’t want people to have an SMSF… now there is a can of worms.