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The superannuation industry must step up its communication and advice to the self-managed superannuation fund (SMSF) industry to prevent the wrong type of investors establishing their own SMSF, according to the managing director of Plan B, Denys Pearce.
Speaking at the Association of Superannuation Funds of Australia (ASFA) conference in Melbourne yesterday, Pearce warned delegates that they had a social obligation to make sure that only those investors who could run their own funds effectively established a SMSF.
“Too many funds have too low balances and are run by people who have a relatively low income,” he said.
“I suspect there are a lot of trustees out there of SMSFs who just do not have the capability to effectively run them.”
Pearce said it was the job of super trustees to talk to members who were thinking of leaving the fund and setting up their own SMSF. The industry must put more emphasis on product education and advice for such members, and adapt their products, services, messages and attitudes to accomplish that goal, he said.
The industry had to warn members looking to establish a SMSF of their legal and compliance obligations, the administrative burden, and the inability to access the complaints tribunal to solve disputes, he added.
Pearce also laid blame at the industry’s feet for the wholesale rise in SMSFs, saying infighting and the devaluation of financial advice had caused super members to “lose faith and go it alone”.
Pearce called on the Australian Taxation Office and the regulators to impose the same fiduciary obligations on SMSF providers that are incumbent on the superannuation industry.
“We’re dealing with a social issue here. These are retirement incomes we are building up in order to relieve taxpayers of the burden of supporting people in their retirement,” he said.
“I don’t think it is an issue that we can afford to ignore. We have to address it and we have to address it very deliberately,” he said.
