In response to the question, ‘Should SMSF trustees be required to have accredited training prior to establishing an SMSF?’ 58.8 per cent of the 199 respondents voted no. The remaining 41.2 per cent of respondents voted in favour of compulsory trustee education.
SPAA’s chief executive officer Andrea Slattery told SMSF Adviser compulsory education for trustees is unnecessary, adding that research confirms 75 per cent of trustees have at minimum an undergraduate qualification.
“All the reviews that have occurred in the market and all of the responses to those reviews have shown the SMSF market, and trustees in particular, are performing well and managing well,” Ms Slattery said.
“This industry [has] a high level of professional advice and engagement, plus it meets all of the government objectives of adequacy, sustainability longevity, gender balance, engagement and choice,” she added.
SPAA does, however. support proposed penalty powers which would allow the Australian Taxation Office to direct trustees to compulsory education if they are found to not understand their roles and responsibilities.
“We believe that’s all that’s needed as far as compulsion; SMSFs are shown to be going quite well and all the research is showing that they are well-educated professionals, executives, small business owners or self-employed,” Ms Slattery said.
Conversely, responding to questions on notice following a recent Parliamentary Joint Committee on Corporations and Financial Services, the Australian Institute of Superannuation Trustees (AIST) recommended SMSF trustees should be required to have accredited training prior to establishing an SMSF.
“Our key point is that SMSF trustees should undertake structured education on their legal responsibilities and obligations when commencing their SMSF,” AIST chief executive officer Tom Garcia told SMSF Adviser.
“We also recommend that they engage in ongoing accredited training to maintain their knowledge. While it’s possible to outsource much of the work involved in running a self-managed super product, ultimately the duties of being a trustee remain and tax penalties apply,” Mr Garcia said.
Similarly, one respondent to the survey agreed trustees should be educated regarding the “dos and don’ts” of operating an SMSF.
“Trustees need to be made aware of the preservation rules as well as following an investment strategy and the need to review the investment strategy over time,” said Ron Malafiej.
“Too often, trustees do not seek advice when making investment decisions and concentrate investments in a single asset class (eg direct property) without considering the need for diversification,” he said.
“Educating trustees would provide trustees with a clearer understanding of their responsibilities and obligations in administering their SMSF.”
Imagine a client who is a busy professional or business person, what is the point of delegating to an adviser if you have to know all the rules yourself? An adviser’s job is to help trustees (i.e. clients) make smart decisions about investing and to be aware of the rules etc.
As one who prepares the annual accounts for SMSF my observation is that 99.99999% of them run their fund very well. But probably only 30% of them fully understand their role and responsibility as trustee of their SMSF.
This is despite the Trust Deed coming with a detailed explanation of that role and responsibility and also the ATO sending similar information to the trustee.
My preference would be a series of Webinars trustees are required to attend when an SMSF is created and/or a breach of their role is detected. These could be run by the ATO -they know who the trustees are – and the ATO monitor their attendance.
I suspect it was the ‘other 25%’ (refer SPAA research) that compulsory training (or even just some basic testing) would most help out.
We’ve got tonnes of stupid rules that waste a lot of time and money of SMSF investors, year in, year out. Some basic testing up front (which the 75% should be able to pass without any need for training) would be a drop in the ocean for them and potentially help greatly those being coaxed into setting up a SMSF.
Of course this wouldn’t be good for the industry (since it would mean less SMSFs). Out of curiosity – how did they vote on the issue?