“ISA and AIST support an enhanced regulatory regime that imposes an obligation on financial planners, accountants and others who 'provide a critical entry point on the establishment of SMSFs' [according to CP216],” said the submission.

The submission also stated only the “very largest” SMSFs would be cheaper than the “most expensive” accumulation industry fund.

The cost-to-earnings ratios for SMSFs with small account balances are “unacceptably high”, according to the submission.

“In addition, far too many SMSFs have what could only be described as a highly undiversified investment portfolio and a consequently high-risk investment strategy with real property investment being a leading factor,” said the submission.

SMSF trustees should also be required to undergo regular education to prove they are a fit and proper person to run the fund.

When an SMSF is registered, each of the trustees should be required to formally acknowledge their duties and responsibilities, as well as the risks involved in running a self-managed fund, according to the submission.

“It is entirely appropriate that such an exercise take place as the cost of failed SMSFs is borne not only by the individual members, but also by the taxpayer who ultimately bears the cost of tax concessions provided to an SMSF and any additional age pension expenditure required in the event that the SMSF delivers sub-optimal results,” the submission concluded.