Reigniting the SMSF fee debate
After stirring quite a response from SMSF Adviser readers with her column last month, Olivia Long replies to her critics.
This article is a follow-up to Olivia Long's column ‘'Does size really matter with an SMSF?’
Remember that saying by Oscar Wilde, “The only thing worse than being talked about is not being talked about”. Well, I can sympathise with the noted Irish poet and author when my column, 'Does size really matter with SMSFs?', stirred quite a response on the SMSF Adviser website. Although some comments suggest I won’t be on the readers’ Christmas mailing list, I still welcome their comments. A vigorous, informed debate can only be healthy for our industry.
It shows people are thinking about their retirement savings – and are willing to have their say. With several significant inquiries underway this year, and with all requiring a political response, an informed public should lead to better policy outcomes.
One reader suggested I had a vested interest. Guilty as charged. I run an SMSF administrative and compliance business and I want the SMSF sector to thrive. I believe in the product and think it’s a good retirement savings option.
But this recommendation comes with a caveat. As I specifically said in the column, people have to be genuinely interested in managing their own retirement income, as well as having the time to do it. History tells us that this will exclude most people, or, more accurately, most people for whom retirement is in the distant future. As we know from the amount of unclaimed superannuation and the number of members in APRA-regulated fund who simply don’t open their statements, for many people their future retirement income simply isn’t on their radar.
That’s why I support the concept of the free start-up. I appreciate that everyone who has opted to go down the SMSF route starts out brimming with enthusiasm. But that enthusiasm can fade; some of the work is tedious. So I tell clients to see how they feel after a year before deciding whether an SMSF is the right option or whether they are better served by an APRA-regulated fund.
It’s not just the administration that’s involved; SMSF trustees are responsible for their own investment decisions. They can get advice from the best financial advisers in the land but ultimately they have to sign off on the decisions. The buck does stop with them.
In my experience a small minority doesn’t like this responsibility. It causes long and sleepless nights, especially if the markets are experiencing volatility. For these people, I encourage them to go back to an APRA-regulated fund where someone else has the responsibility.
But for the critics, here’s the rub. Quite evidently the vast majority of SMSF trustees are happy with making these decisions. While a number of SMSFs do close each year (and not all for the reason that the trustees are disenchanted), figures from the Australian Taxation Office show those closures are far outweighed by the new entrants coming into the ranks – nearly one million trustees can’t all be wrong.
One final point: at the beginning of this column, I declared my self-interest. What I ask readers of SMSF Adviser to do is pose the same question to our critics. They might be surprised by the answer.
Olivia Long, CEO, SuperGuardian and Xpress Super