Speaking at a Financial Services Council (FSC)/Deloitte lunch in Sydney last week, Mr Cooper said while self-managed superannuation is appropriate for many people, there are others who lack the skills and the aptitude to be able to do it properly.
“You ask them why they’ve got them, and a lot of the reasons they give can actually be achieved in a different and less risky way,” he said.
Furthermore, the possibility of SMSF trustees “getting into some trouble and blowing themselves up” represents a significant risk for the financial system, said Mr Cooper.
“How do you fund those people [in retirement]? Because it is a lot of money back out of the system again,” he said.
FSC chief executive John Brogden said there were “absolutely” people out there who shouldn’t be managing their own superannuation.
“They’re not a majority, but there are people who don’t know what they are doing and would be safer in a [larger superannuation] fund,” said Mr Brogden.
In addition, there are no compensation arrangements for SMSF trustees who are the victim of a Trio Capital-type fraud, he said.
“Not unlike the vexed issue of deposit insurance, do we require self-managed superannuation funds to … pay into a levy?” asked Mr Brogden.
I will remember this when BT comes knocking to set up account services for SMSFs. And of course, APRA funds know exactly what they are doing, because if they did, they wouldn’t need to be dipping into their compensation fund on such a regular basis.
I think that in some cases SMSFs are very well managed by the financial planner and accountant but sometimes the trustees lack direction. In my case I ensure that I give the trustees the education on the tax, protection and investment options. In the end I think that most of my clients are at least informed. If they decide to not accept my advice then that is why they have an SMSF. SMSFs are also about the trustees comfort, control, flexibility and the transparency of their investments.
At least when an SMSF loses money the trustees know why but with other funds the transactions are lost in the detail. We simply do not know what the fund managers are doing with super money.
For me a SMSF with a good adviser and accountant is the best way to go and I have proven that in my own practice. We beat the indexes consistently.
One of the best threads for a while! Keep the comments coming!
Seems when fund managers make statements about structures contrary to theirs it sparks debate.
We have no doubt there will be a significant case in the future of large scale misuse. Lumping all trustee’s into this pool however, reduces the ‘self’ in the self managed super fund to a useless title. Those who lack the skills to do it themselves should be receiving advice, and those giving advice should be regulated. And by those giving advice we are not highlighting the financial adviser and accountants doing the right thing. It is those with a vested interest in the financial outcome who need closer scrutiny. Not only those selling property, but managed funds and shares alike. We are aware of some insurance companies developing products to protect against fraud. Lets hope it is priced well and adopted into the industry.
[quote name=”Barry Lambert”]The reality is SMSF is the low cost platform of the future and are becoming much more efficient. Competition hurts![/quote]
I totally agree
Even the ATO said early this week ” The ATO made 150 funds non complying in year 2012-13. & disqualified 440 individuals from being trustees.
Those numbers do NOT support the argument that out of the 500,000 SMSF with a nearly a 1 mill members that these people or their accountants are cheats or incompetant morons as many articles (like the above) suggest.
what the ATO numbers do suggest, in my opinion, is that most funds are run by members who want to build up their retirements balances & have used their accountants as an integral part of that objective.
The reality is SMSF is the low cost platform of the future and are becoming much more efficient. Competition hurts!
WoW……now I have absolutely heard it all! Those desperate fund managers wanting new business and inflows now trying to label a SMSF as a status symbol! When will it end. It is only because these so called industry professionals are so incompetent at managing money, that suburban accountants and planners have taken it upon themselves to advise and guide clients properly. Best move I ever made was joining an accountancy practice that specialises in advice to SMSF’s. Gone are the poor performing retail funds and expensive master trusts, that cost me 15 years of my professional life as the idiots running them don’t have to look the clients in the eye. Good comments to from Dr Terry Dwyer.
If Rob thinks that SMSFs are a burden, then he is obviously doing it wrong!
I speak to hundreds of SMSF trustees each year – and yes – control is part of it, but for the overwhelming majority it is about taking responsibility for their own wealth creation.
I agree with Brad Cooper to a degree – there are some people who shouldn’t have a SMSF, and it is the responsibility of an adviser (accountant/planner/auditor) to tell that person that they should look at another option.
If there are people who either have a SMSF or are looking to set one up, then it is OUR RESPONSIBILITY as gate keepers to ensure it is suitable.
And add to that there are a lot of SMSF started because accountanst are greedy and want additional fees and have no interest in doing their job properly, and they claim to be professional? Give me a break!
Oh dear! Can’t have people managing their own money can we? And we shouldn’t mention cases where the person was getting negative returns from the experts? Nor should we mention cases where wrong information from the experts has triggered excess contributions tax later.
The biggest risk to people’s superannuation is everything being left under the control of a dozen or two fund managers who will destabilize investment markets like a herd of elephants. Decentralized investment decision making is best.
Dr Terry Dwyer
Dwyer Lawyers
http://www.dwyerlawyers.com.au
Status symbol? SMSFs are nothing but a burden. People see this is a way of getting back some control over their future (instead of leaving it to others). They also see SMSFs as nothing but red tape and a compliance nighmare. If you saw your BMW that way – you be rid of it straight away.