Provided the terms and conditions are appropriately disclosed, the concept of a free SMSF set-up offering is not inherently problematic, Heffron’s managing director Martin Heffron told SMSF Adviser.
“I think it’s just important to be aware of what you’re paying for; there’s no such thing as a free lunch,” Mr Heffron said.
“There’ll be different business models that generate their margin in different ways. [Hypothetically speaking] you might have a free SMSF set-up as part of a deal that puts you into a low-cost admin product… but for that low-cost admin product, you have to use other financial products.
“From the consumer’s perspective, it’s important to understand the totality of whatever the business model is.”
Xpress Super and SuperGuardian chief executive Olivia Long also said the concept of a free SMSF is not “fundamentally” problematic if a quality service is being provided and appropriate disclosures are provided.
“There are a number of good SMSF administrators out there who have a quality service, who want to be able to promote themselves to trustees [but] that don’t have the advertising or marketing expense account that [a larger institution] does,” Ms Long told SMSF Adviser.
“It’s a cost of sale really, it’s a marketing expense and as long as there’s a quality service behind it I think that’s reasonable.”
These comments follow SMSF administrator SuperHelp’s payment of a $10,200 infringement notice penalty after the company made “potentially misleading statements” about the cost of setting up an SMSF.
ASIC’s concerns related to an advertisement SuperHelp published in the October 2013 edition of the Australian Financial Review’s Smart Investor magazine, according to the statement.
“The representations were that fund set-up was free and that pension fund set-up was free, subject to ‘*conditions’. No conditions were disclosed in the advertisement,” ASIC stated.
Can a super fund purchase a commercial property with LRBA in place and renovate the property which is next door to a commercial property currently owned by the same members of a unit trust. The renovation required is a complete new fitout of the new commercial property in which a business is run by the members of the super fund and unit trust – in other words expanding the current commercial space by knocking hole in the wall between the two properties.
It’s just another sales pitch
I can see the advantage to an administrator of offering a free Trust Deed to ensure all Trustees have a consistent Trust Deed across their client base. With the proliferation of online document providers many people are shopping around and getting the lowest price and then approaching an administrator to take on the business. As such you could end up with numerous different deeds under your Admin which even as a FP I find annoying and time consuming as it takes a lot of time to read and understand the structure of each deed.
So as long as the ongoing costs are disclosed and any compulsory facilities such as designated share service or bank account are made clear before signing up then I have no real problem.
I like the idea that my administrator will only have one deed to be a expert on and knows the limits and limitations of the clauses of that deed from A-Z.
I disagree with offering fee free establishment of an SMSF. This legal vehiclae has ongoing cost and responsibilities attached so in my opinion the fee free approach is misleading or at least sends the wrong message to the new Trustees. This should not be an area where slick or creative marketing is allowed. I support ASIC in suggesting this is an area of concern.