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ASIC releases new SMSF advice guidance
ASIC has this morning released new guidance on SMSF advice, which deals in part with ASIC’s views on starting balances for SMSFs.
The information sheets are Information Sheet 205 Advice on self-managed superannuation funds: Disclosure of risks and Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs.
INFO 205 and INFO 206 follow Consultation Paper 216, released in 2013, which outlined proposals to impose specific disclosure obligations on advisers giving advice on SMSFs.
According to ASIC, the new information sheets are intended to help advisers comply with their conduct and disclosure obligations under the Corporations Act and outline what ASIC looks at when undertaking surveillance in this area.
The guidance specifies the types of risks and costs that an adviser should consider, discuss then disclose to clients when providing advice on setting up, or switching to, an SMSF.
The information sheets also deal with the cost-effectiveness of an SMSF, “making clear” ASIC's view that an SMSF with a starting balance of $200,000 or below is unlikely to be in the client’s best interests, and that advice to establish one below that threshold is more likely to be scrutinised by ASIC.
“Setting up an SMSF is a significant financial step for consumers and many factors can impact their decision,” said ASIC deputy chair Peter Kell. “It is therefore important that consumers receive good quality advice that will assist them in making informed decisions about their retirement savings.
“ASIC wants to ensure that only those investors for whom an SMSF is suitable are advised to establish an SMSF and that our expectations around the standards of advice are clear,” he said.
“SMSFs are a key priority for ASIC and we will continue to target inappropriate advice about SMSFs in our surveillance work.”
The information sheets also provide “compliance tips” that indicate the factors ASIC is likely to look at more closely as part of surveillance activities.
Scott - My fund certainly wasn't set up by an accountant to get a fee. It was set up by me using a deed from Clear Docs.
I don't have only cash, I have some shares also. It is probably fair to say that cash hasn't done as well as shares over the last 24 months, however the last six months the cash has certainly outperformed the shares (and the share market in general). It's not exactly difficult to beat a negative return...0- Most funds I have seen with small balances have been set up by accountants to generate more fees. I don't really see the merit in more paperwork from ASIC which ignores this fact.
I would also be curious to see how Gary in the previous comments has gone in cash compared to a balanced funds since he established his fund in 2010 (2007 + 3 years). The psychology of people is an amazing thing.0 - As an adviser we are compelled to act in the client's best interest. A SMSF is a tax structure set up for the sole purpose of providing it's members with a retirement benefit. Cost is a consideration but purpose is surely the main driver. It may be entirely appropriate for a client selling a business to set up SMSF with minimal funds in order to save paying a huge Capital Gains Tax bill. Applying a threshold in this case would definitely not be in the client's best interest.0
- I recall the conclusion of the Cooper Review in 2010 "the SMSF sector is well run".
Why then the need for more Govt interference and regulation?
Rules and regulations devised by career public servants with Govt defined benefit superannuation entitlements.
You are regulating Australia out of existence!0 - I had about $20k in my SMSF when I set it up. It would have been more but for the commercial funds losing money for my first three years in super (I moved to Australia in 2007). ANY government organisation that thinks a commercial super fund consistently losing its members' money is better than letting the member control it himself is wrong in my opinion. And for what it's worth my compliance costs in my first year were less than what SunSuper lost the previous year (my labour not included of course).
The only comment I would make is that I don't think that SMSFs should be pushed into shares in the name of "balance", particularly during volatile periods like we are currently experiencing. Sometimes a simple fund whose only assets are cash in various banks is better.0 - ASIC seem to think the same way as industry funds i.e. that the ONLY consideration is fees/costs.
ASIC already have rules in place to ban inappropriate advice but they seem to find it impossible to police these. Making up "rules" about minimum balances is both a waste and abuse of their resources.
Does this mean if inappropriate advice is given to set up an SMSF with - say - $300,000 balance, ASIC won't ever spot it?0 - Whilst there are clearly people with SMSFs who simply are not suitable for such, it is not all about minimum balances. It is all about the sole purpose of providing a retirement income stream. Towards that sole purpose some people genuinely believe that sacrificing short term returns, and/or maybe paying a little more initially, should ultimately over the course of decades provide a better outcome for their retirement income needs. What someone chooses to invests in, and what mechanism they use to hold the investments, is secondary to the targeted outcome. SMSF or not, the question should be what is likely to be the best way to achieve the sole purpose of maximising the individual retirement stream. Sometimes that is SMSF with a low balance and sometimes it is something else.0
- I feel that more and more planners are required to meet guidelines and everyone is to be treated alike. Appropriateness of advice to clients, although, now put into law, is then ignored as we need to comply.
Example is 2 clients contributing $60,000 pa into super should not be put into a SMSF as there current balance is not $200,000.
I think its about time to allow us to give appropriate advice.0 - Most looks reasonable but a worry ASIC is saying people taking a direct interest in the running of their own super should be seen as a bad thing and listed as an "opportunity cost". If you take that view what about the benefits of them learning more about financial and property markets, tax system etc? Betrays a certain paternalistic viewpoint inside ASIC.
The on going point made many times by many people is where is the ASIC "guidance" demanding adviser of an APRA fund member with a big balance say $500K plus that highly likely the cost of running their super would now be much less in a SMSF and only get more so as funds grow and economies of scale continue to swing further in their favour? VERY STRANGE WE NEVER SEE THIS0
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