ASFA calls for tighter SMSF controls

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The Association of Superannuation Funds of Australia (ASFA) has pointed to the development of commercial relationships between accountancy firms, mortgage brokers, real estate agents and lawyers as posing a “genuine risk” to the provision of good advice with respect to establishing SMSF’s.

ASFA has raised the issue in a submission to Treasury, calling for tighter controls.

Referring to the ability of SMSF trustees to borrow money through limited recourse loans to purchase property assets, the ASFA submission, filed late last month, argues that property is not regulated as a financial product and that the results of this are “potentially problematic” for clients.

“We have seen the development of commercial relationships between accountancy firms, real estate agents, mortgage brokers and law firms that provide a one-stop service of purchasing property through the establishment of an SMSF. Because property is not regulated as a financial product under the Corporations Act, currently nowhere in these arrangements do we have an AFSL and certainly no obligation in relation to best interest duty or disclosure of conflicts and remuneration.”

The submission says the Financial Ombudsman Services (FOS) and law firms are increasingly being approached by people who should not have been advised to move from their existing funds into SMSFs.

"The world has changed and SMSF's are part of the structure of the superannuation system. It is important that we strengthen the structure as a whole, not weaken it.”

ASFA’s submission says that accountants and "others” should be authorised to provide financial product advice on SMSFs, or to provide advice on superannuation products in relation to a person’s existing holding.

“In ASFA’s view, an authorisation limited to SMSFs may mean that there is no obligation on the accountant to assess whether or not a person is better off in an SMSF compared to their current fund or product as they do not have the authorisation to give advice on other products.”

  • Papery on 10/01/2013 2:10:33 PM

    Agree with May. I think the gist here is that if you are looking to move into SMSFs that you get good advice (pros & cons) & understand all the risks, beneits & ramifications especially if a borrrowing strategy is also being employed. The 'sales spin' needs to be balanced

  • David on 9/01/2013 3:55:35 PM

    I'm sure I'm typical of the majority out there who are seeing appalling returns from retail, wholesale and industry Super Funds.

    I rolled $126k over in late 2006. Strangely enough, I hadn't received an update from my Planner since then. When I asked for an update late last year I was told my balance was now $96k. It seems my "Qualified" advisor was too scared to let me know this so the statements were never sent out. He also made no effort over 6 years to make recommendations of alternatives. No wonder so many are disillusioned and SMSF's are now making up around 40% of the market.

    I agree with May that the industry body is merely trying to protect their industry, which I would fully expect them to do. What I'm more scared about is the Unions pushing the current Government to tax SMSF's higher than Industry Funds. Sure, they don't want to lose funds under management but maybe if they made better investment decisions people wouldn't be so disillusioned.

  • Wayne on 9/01/2013 1:12:51 PM

    Well said May.

    The problem is that there will always be dodgy opperators out there who will take advantage of gullible people and no amount of regulation will prevent that. Certainly holding an AFSL won't, but Fund Managers will use this as an excuse to loby govt to make the changes to protect their incomes and the govt of the day, regardless of whom, will allow them to do it because that's how the system works.

    Sad really.

  • Gibbo on 9/01/2013 11:56:14 AM

    Well done May and "we're done" with that issue.

  • 1martym1 on 9/01/2013 10:12:52 AM

    The lady doth protest too much, methinks

  • Fan of May on 9/01/2013 10:05:49 AM

    Well said May, explained beautifully.

  • Super funds are rip off on 9/01/2013 9:50:07 AM

    Currently I am with first state super, what it does is hold my money for few weeks before it is credited to my account. For these few weeks they sit on my money and reap reward imagine how much they are ripping off by doing this to every client. First state super is suppose to be best. Get out of them and take control with SMSF investment choice can be any.

  • May on 9/01/2013 9:32:52 AM

    The Trustee of the SMSF is responsible for making their investment decisions. No matter what industry super funds try to argue, the SMSFs statistically have provided better returns than the so-called experts.
    Since setting up my SMSF I have not had negative returns due to poor performance and high fees.
    Who does the ASFA represent? Industry funds? Their concern is not for the members of the super funds but their own survival.
    It is clear they do not understand the current legislation that requires disclosure of commissions by mortgage brokers and any referral fees received by accountants. All the advisors are now under ASIC licensing and highly regulated.
    If the ASFA is so concerned about their members future retirement how do they explain my son's industry fund for hospitality REST which have been sending out a benefit statement of $0 yes ZERO balance for the last 5 years.
    The SMSF system and network of advisors who are experts and licensed in their field serve to provide 360 degree service to the SMSF trustee and this only serves to strengthen the investment decision advice. And we do not need further legislation to stop us from directly investing in a known property with known and assessable risks and returns rather than the fee-laden financial product based on property trusts with totally unknown properties.
    The ASFA should look to their advisors' lack of expertise in looking after their members funds instead of trying to cry foul because they are losing market share due to their own poor track record.
    Ultimately, it is my money, my retirement and I am totally responsible for it not some faceless super fund administrator offering some set options of percentages of totally unknown products.

  • Allan Faint on 9/01/2013 9:14:43 AM

    maybe wrong but suspect the submitters are worried they are missing out on income

  • Country Broker on 9/01/2013 9:12:11 AM

    Oh Dear,
    Rhere are also commercial relationships between financial advisers and brokers.
    Tne statement that the loans are not regulated is a very grey area , if the trustee is corporate , it is clearly not regulated or if the property is commercial - not regulated.
    If the trustees of a fund are individuals and it is a RESI Investment , is it regulated or not under tghe NCCP . The commentary and oponions fails to address this issue.
    There is nothing wrong with a "one stop shop" so long as all commissions are revealed and all advisce is recorded.Real estate agents or buyers advocates are and can be a problem if they try and give advice care is needed here.

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