A visiting European financial literacy specialist, Robert Holzmann, has expressed dismay at Australia’s lack of competence testing for people setting up SMSFs in Australia.
According to News Ltd reports, Holzmann, a former Senior Advisor to the World Bank, believes those wishing to set up an SMSF in order to purchase property or invest in other areas should be required to take a specialised financial literacy course.
"In some states in the US, people are given training before they are even allowed to draw down a mortgage," says Holzmann.
"I am astonished at the ease with which the establishment of SMSFs has taken place in Australia."
He says recent statistics in Australia from the ARC Centre for Excellence in Population Ageing Research at the University of NSW showed 27.1% of SMSF trustees ‘only’ have a trade or diploma qualification, while 13.7% have ‘only’ completed high school.
"If you are not sufficiently equipped with knowledge you are running a serious risk as an SMSF trustee," he says.
While he acknowledges that many SMSF trustees are self-employed and may have ample financial experience, he says it’s ‘no longer a question of financial literacy alone.
“Providers and regulators need to ensure people have the skills as well as the understanding of how financial markets and products work…My take is that success in one area is neither necessary nor sufficient for success in another area - you cannot automatically translate expertise from one area to another.”