A further 35.5 per cent said the letter campaign represented the opportunity for the SMSF industry to “step up” as regards investment strategy, which Smarter SMSF chief executive and co-founder Aaron Dunn said had been a commonly neglected area when it came to SMSF documentation.

“Many investment strategy documents over time have been very poorly developed where it may be a single page or two pages that replicate the requirements within the regulations,” Mr Dunn told SMSF Adviser.

“In this instance, trustees have not clearly demonstrated how they have considered each of the elements of risk, diversification, liquidity, the ability to discharge assets when they fall due, contracts of insurance etc.

“Documentation needs to better demonstrate how trustees have come to the decision being made as to how the fund invests, not simply heading straight to the investment ‘start line’.”

Mr Dunn said some of the resistance coming from professionals in the sector around getting involved with client investment strategy may be coming from a lack of specialist knowledge as well as worries about breaching advice laws.

“We have a wide spectrum of skill sets among professionals dealing with trustees — specialist service providers within the industry typically will have a more comprehensive understanding of the role an investment strategy might have in meeting a client’s objectives, in addition to the SIS requirements,” he said.

“On the flip side, other practitioners might see it simply as a compliance box that needs to be ticked, hence we end up with a significant disparity between good and poor [outcomes].

“I also think the role of ‘who can advise’ plays a big part here — there’s still a sense of trepidation among accountants in the role they can play, most important[ly] ensuring they don’t overstep any line that would be considered advice.”

Mr Dunn added that while there had been “some lessons for the regulator” around the tone and manner in which they had chosen to communicate with affected SMSFs, concerns around investment strategy construction were valid given the number of funds that were highly concentrated in one asset.

“ATO statistics show that asset concentration is not limited to LRBAs with real property — nearly one-third of funds have a single asset or asset class within their fund,” he said.

“Therefore, from a regulatory context, it is about how the trustees have demonstrated how they are managing the risks with inadequate diversification.”