Are SMSFs being mis-sold?
Industry fund members with balances of as little as $30,000 to $40,000 are being directed towards self-managed superannuation funds (SMSFs) with increasing frequency around tax time.
That is one of the claims made during a roundtable conducted by Money Management's sister publication Super Review, with former Australian Institute of Superannuation Trustees (AIST) president and chairman of Media Super, Gerard Noonan, expressing concern at what he described as "inappropriate advice".
"We certainly find there's a lot of inappropriate advice," he said. "I know about it from my own fund, but also across the AIST universe - we know that there are people who are leaving industry funds with amounts of $30,000 and $40,000 in their account."
Noonan said that, in his judgement, those people were being inappropriately advised to take up an SMSF.
"Now it's not true that all departures from our fund are of that order, but the average is," he said.
Energy Industries Super Scheme chief executive Alex Hutchison said he believed outflows to SMSFs were largely attributable to the relationship fund members had with their accountants.
"I think it's frankly testament to the relationship accountants have with their clients," he said. "It starts and ends there. They probably look at it and say, 'yes he's an accountant, he's my accountant, I trust my accountant, he's telling me that's good for me, under the new rules, and even under the old rules', and away we go.
"So it's a relationship issue, and I think the only way that - whether you're a retail fund or an industry fund - [you] can conquer that, is attempt to have a stronger relationship with that member," Hutchison said.
Noonan agreed about the influence of accountants in the equation, pointing to the flurry of activity "around about August or September, when people are doing their tax, because you suddenly notice that there's a spike in departures".
"But it is also true I think, in a significant number of cases, that it's not only a benefit to the individual, it's a benefit to the accountant who is recommending this," he said.
However Deloitte partner Russell Mason said it would be wrong to suggest that large numbers of SMSFs were being inappropriately established on the basis of low account balances.
"I guess like most things, there are many myths around SMSFs," he said. "For instance, only 11 per cent are less than $100,000, and I would agree with Gerard, those that have got small balances, and haven't got the capacity to increase them, have probably been mis-sold and misled.
"On the other hand, the average balance is $1 million, which means, on average, there are some very large balances in SMSFs," Mason said.
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
