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ASIC flags concerns with inappropriate SMSF set-up
ASIC has expressed concern that a growing number of investors are setting up SMSFs when they are inappropriate for their circumstances, with the volume of assets in self-managed funds now outweighing both industry and retail funds in the Australian super system.
In a statement released on Friday, ASIC commissioner Danielle Press said many consumers may be focusing too heavily on the benefits rather than the risks of running their own super fund.
“SMSFs may be an attractive option for investors wanting more control over their superannuation investment strategy, but it requires real skill, care and diligence to manage your own superannuation,” Ms Press said.
“SMSFs are not for everyone simply because not everyone can meet the significant time, costs, risks and obligations associated with establishing and running one.”
The regulator noted that the total pool of SMSF assets numbered $748 billion, compared to $719 billion in industry funds and $626 billion in retail funds, according to ATO statistics.
The comments come as ASIC released its new fact sheet, Self managed superannuation funds: Are they for you?, which is aimed at helping investors make more informed decisions as to the appropriateness of setting up an SMSF.
ASIC said it would begin a pilot program in November of sending all newly registered SMSF trustees the fact sheet, which contains statistics around how returns compare for SMSFs with a balance below and above $500,000, details on reporting requirements and annual fees for SMSF trustees and the consequences of non-compliance with the SIS Act.
Additionally, the fact sheet contains details of the risks of investing in property through an SMSF, such as high upfront and ongoing costs and potential difficulties with selling or renting the property.
The regulator said the development of the fact sheet had been driven by its Report 575 into improving the quality of advice and member experience in SMSFs, which had identified several “red flag” indicators that suggested when an SMSF may not be appropriate for a client.
These included the client having a low super balance and a limited ability to make future contributions, a desire for simplicity in their super set-up, the client wanting to delegate all management and investment of their super to their adviser, and a lack of time on the client’s part to manage their own financial affairs.
“When people have limited investment decision-making experience or prefer to delegate decision-making to someone else, they should carefully consider if an SMSF is right for them,” Ms Press said.
“As trustees of their own fund, SMSF investors must remember that they are responsible for their fund’s compliance with the law, even if they pay a professional to help.”
ASIC quoted an average cost of running a SMSF in excess of $10,000. If they are using information that is so obviously incorrect you have to wonder whether ASIC should be issuing any notices at all.0- Because lobby groups says ASIC should / “have to”. They cannot think for themselves, but let the lobby groups / left leaning political influencer tell them what to do and who to target. You don’t have ATO/ASIC write to industry fund/ public offer fund members who choose >90% high risk (international shares, ‘leveraged’ funds, aggressive, etc). How quick has ASIC/APRA forgot the 20% loss year on year in circa 2007-2008.. for a total of 40% loss in super of average balance member account. At the end of the day, a dollar less in those funds are less revenue for them. They want their 1% fee. As more money pour into SMSF, they are getting less 1% fee. ASIC and APRA should tell everyone to stick it into index based, e.g ETF for 10 times less than any industry super fund and on average get better return; was it not that 9 out of 10 super funds out there do not outperform the index over a 10 year period. Go figure. ASIC/APRA/ATO as usual are puppets, always kowtow to their puppet master.0
- Whilst I doubt the methodology of the research is correct given that every other report ASIC report has done in the past 10 years had the press release written prior to the statistics being done I will give ASIC some free advice -- if you are concerned about something then do something about it as that is your job.0
- Yes there are SMSFs out there which should not be - As an accountant, we know of one case where the client was asked to get financial advice before the fund was setup as it was purely to purchase a residentail property for renting and - It was indicated that this advice was sought and received but in view of subsequent events it became obvious that the client lied about this. This client after receiving the first PAYG installment demanded to know why this had to be paid as in their mind SMSF dont pay tax!!!!. How do you weed out the people that should be in SMSFs when the client provides you with false information? Is it really out responsibillity now to throughly test the client knowledge base to see what they understand about SMSFs even though we do have an indepth discussion about this before setting up one and this client had received financial advice.0
- The fact is that even 200K in an SMSF with a low cost provider and software platform will outperform an industry fund when taken in the the light of appropriate risk profile for the member. I.E the member knows their own appetite for risk and objectives for retirement better than any one else. They care about it more than anyone else. Hence ultimately they should be allowed to be responsible for it, and be educated on keeping others snouts out of it!0
- Here is an interesting question - can asic be charged for false and misleading information given a large premise of this press release is based on the ATO data which compares returns of SMSF after members insurance premiums with APRA fund returns before insurance premiums0
- Sure a SMSF ain’t for everyone.
But how crazy are the Left Wing nutters going after SMSF’s. Labor lost the unlosable election when they had already counted on closing down LRBA’s to satisfy their Industry Fund besties. Now the attacks are coming think and fast from Left Wing Labor, Industry Super and the ASIC / ATO public sector buffoons.
What a shame it’s all politics and my god imagine anyone wanting to fend for them selves and help manage their own retirement destiny.
Nanny state left wing losers please find something better to do that is useful than beat up those trying to work hard and support themselves in retirement. And actually show interest in their own means to do so.0 - I wonder if ASIC is aware of the flawed methodology in the Productivity Commission Report, on which the "fact" sheet is based. If a financial adviser was as careless as the Productivity Commission then ASIC would be all over them. And when will ASIC be sending a fact sheet to members with large balances in public offer funds, advising them that SMSFs might be more suitable? And what about a fact sheet for investors in high risk (much higher risk that direct property) investment options within public offer funds?0
- Why are they focusing on property.... again...? It is not a significant proportion of overall asset class investment. Will ASIC also send out a flyer detailing the risks of investing in shares? Nanny State!0
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