In an announcement this week, the ACTU said that it supports calls for an inquiry examining “the underperformance of small SMSFs”, after the final Productivity Commission report suggested that SMSFs with less than $500,000 perform worse than public offer funds.
While the final report decided against recommending a mandated minimum, it did state that advisers should be very clear in their advice about why they might be recommending an SMSF where the client has a balance below $500,000.
ACTU assistant secretary Scott Connolly claimed that “too many workers are duped into starting an SMSF when the experts know accounts with relatively small balances will not perform”.
“The Productivity Commission report raises questions about the value being provided to customers by SMSFs and this should be thoroughly investigated,” Mr Connolly said.
“The banks sell SMSFs to low super balance workers because they can charge massive fees, take a large cut of investment returns with little to no scrutiny.”
Mr Connolly also claimed that “industry funds have been shown to be consistently outperforming all other types of funds”.
“The funds which are failing their members should be exposed to extensive scrutiny,” he said.
SMSF Association chief executive John Maroney said the ACTU’s call for a fresh inquiry is completely unwarranted, with the PC’s finding that SMSFs with less than $500,000 are underperforming the APRA-regulated funds based on “highly questioned data” about SMSF investment returns and costs, as well as poor methodology.
SMSF software firm Class previously pointed out that, even in the final report, the Productivity Commission did not fully account for the differences in the methodologies used by APRA and the ATO, which resulted in SMSF performance being understated.
“Certainly, there are more than enough question marks about the PC’s analysis to dismiss any call for another inquiry, especially when the PC, in its final report, said there should be no barriers to individuals setting up an SMSF and that these funds provided a key source of choice in Australia’s increasingly concentrated superannuation sector,” Mr Maroney said.
“In addition, this type of simplistic analysis ignores the non-financial benefits that many SMSF members believe they can only achieve in overseeing their own fund, including greater control, flexibility and transparency.”
He also noted that it’s often forgotten by critics of the SMSF sector, such as the ACTU, that it has had three reviews in the past decade, with none of them recommending any significant restrictions or changes to SMSFs.
“The Cooper Review, the Murray Inquiry and the PC have not recommended restrictions for SMSFs or tighter regulation of the sector,” the chief executive said.
Perhaps there should be inquiry into balances above $500K. To determine why anyone with a balance of more $500K should be in a APRA Regulated Fund…
I investigated the cost of closing my SMSF and moving to an industry fund in the event of a future Labor government. After fees, my annual return would be decimated. I wonder how many fund members are aware of exactly how much fees are affecting their performance, compared with the costs of an SMSF?
How much do union officials get paid for being on boards of these industry funds? Does more money in these funds result in more cushy jobs for union officials, or higher pay for the ones already there? Should there be legislation requiring announcements like this to come with a disclosure of any conflicts of interest?
Should there be calls for an enquiry into fees charged on larger balances in industry and retail funds? Because these funds charge fees as a % of member balances, people with larger balances can save significantly on costs by having a SMSF. Are these people being duped? Are there member balances underperforming due to the higher fees?
Does the ACTU actually realise that an SMSF is simply a trust to hold investments. Underpeforming occurs in any holding structure, be it SMSF, retail or industty fund, if the investments chosen are crap and the client is getting ripped off by fees, be it directly by the adviser or indirectly by the accountant/product provider.
just feeding their own again, ACTU does not care about independence, just total control so that we all can be drip fed what they want and say. Never mind their influence on politicians such as BS & that light labor conman MT. I see he still wants to put his two bobs in print.
The long-standing motivation for most people to start a SMSF is control. Taking control away from banks, and conflicted boards at industry funds. (Trade unions.) There is no need for any inquiry – the facts are already known. All that is needed is for people interested in starting a SMSF to consult a properly qualified specialist SMSF adviser. It would be helpful to the public if this was mandated. An opportunistic self-serving inquiry will do nothing to assist the public.
The last GFC the industry funds performed poorly compared to SMSFs who were largely in cash. When the next one hits I think the SMSF Association should run the numbers over industry funds and see how much money is lost by union members.
Wow amazing the Union movement wanting to put crap on SMSF.
Who would of thought they hate SMSF, hate LRBAs, hate anything that is competition to their Union run ISAs.
How about a review of ISAs like Hostplus that only have 5% real Defensive assets in their Balanced portfolios ?
How can 15% of Hostplus Defensive assets be property and 10% of Growth assets also be property with zero disclosure about the difference between such property ?
How about a review that All Industry Funds are doing this and a little reminder of the past ISA top return performer MTAA.
Anyone at ISA remember that disaster in the GFC and the 10 years that followed ?
Really the boss of the ACTU is backing union based industry funds…no conflict of interest there for sure