In a submission to Consultation Paper 216: Advice on SMSFs: Specific disclosure requirements and SMSF costs, Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST) have pointed to the “unacceptably high level of poor advice” being delivered to people considering the establishment of an SMSF.
“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.
Advisers must be required to discuss insurance issues with SMSF clients as laid out in ASIC Report 337, said the submission, including: the clients’ existing coverage; the future need of insurance coverage; and the cost and options of maintaining or changing the level of coverage through an SMSF.
The consequences of health issues that may affect the ability to obtain insurance should also be discussed, as well as the advantages of maintaining a level of insurance via membership of an existing APRA-regulated fund and the impact of insurance costs on an SMSF’s account balance, ISA and AIST both said.
In addition to insurance issues, the submission argued that advisers should be required to discuss the lack of access to the Superannuation Complaints Tribunal; a relationship breakdown between fund members; an illness or the death of a trustee; and a fund member no longer wishing to be a member of the fund or moving overseas.
The failure, sale or change in circumstance of a related entity that is closely associated with the SMSF should also be discussed, as well as the advantages and disadvantages of the different forms of SMSF structures, the submission said.
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.
Cheers to Rick – Here’s another tale.
Got a referral for a client with cerebral ataxia(like being drunk all the time) who had an Industry fund. Due to his illness he claimed his super under disability at 48 years of age with the ISF prior to seeing me. He has memory issues so I asked for his last statement from his ISF only to discover he had TPD. It had since ceased as he closed the fund due to disability. Asked said ISF why they failed to mention the TPD when access to super was due to disability. The answer ‘its not up to us to tell the member’. We got the money after a protracted campaign. He was a member of the ISF for 18 years. I think we need to publish this information more widely and more often.
Here’s a tale for you all.
An Industry Fund gets a new membership. They use the associated info such at TFN, Date of Birth etc, to look for “lost super” and find their new member has another fund. They send a no advice letter offering to consolidate the “lost fund” (which was not lost so how did they get the information) to the new one they control. The client was retired but had returned to part time work and incidentally been enrolled in a default fund. The old fund was an Account Based Pension which considered estate management issues as well as the client’s cash flow needs. If the client had not approached his “trusted adviser” for classification but had acted on the letter, the outcome would have been regrettable to say the least. And the puritanical carpet beggars at the Industry Funds reckon we need more monitoring. All they are worried about is funds under management and how to increase them and how to protect them.
Let the market rule.
Dear oh dear
Money is pooring out of the ISN to SMSFs
The ISN once again resort to their usual tactic – blame the facilitators, and seek non-market intervention in your favour.
The ISN does not appear to think that the reasons for the bulk withdrawals might just lie with the ISN.
Poor service, appalling admin, no access to full advice and some previous investment strategies involving tropical islands come to mind. Certainly there is little disclosure about exactly where the clients money is invested.
In any event, there are some strong indications that most of these SMSFs are being set up by accountants who are not necessarily part of an AFSL
Lift your game ISN, like every other competitor in financial services.
That plate you got used to now has a new owner
lets throw some more “”legitimate”” rocks. ISNs made a big point re insurance, how stupid when their own cover is so full of holes–at work definitions-reports show they take premiums and you are covered–OOPs no claim –you were not at work on a specific day. Q super –off for 6 months and TPDd, pay out the small claim BUT OOPs, your IP just got cancelled, that why we HAVE cheap and USELESS insurance cover. Want hundreds more examples why ISN cover is garbage. Its cheap and worthless and any planner who has worked with these client knows the facts. Forget the rocks- lets see REAL answers and honesty from ISNs- bet they can’t dispute the above statements
The above mentions all the things the ISFN don’t do and all the things that FPs and anyone in the real accredited world already do. People are wising up to the ISFN vested interest and con job and is surely one of the main drivers behind the growth of SMSF. The above article clearly shows just how out of touch ISFN is from reality of advise in the real world. Given ISFN clients are our practices biggest source of new SMSF clients should come as no surprise.
Wow, this ongoing and concerted attack on the Advice industry says a lot about the Industry Funds’ service capability (or lack thereof).
Talk about flogging the dying horse of the ISFN. Any Accountant/FP Professionals already ensure everything mentioned above happens. While the ISFN keep flapping about issues such as this I intend to continue on my personal crusade for decimation of the ISFN one client at a time. Its great talking to ISFN clients given they are coming from and environment of hidden fees, substandard or no advice, questionable returns from Iliquid funds and hidden backhanders to Unions not to mention years of lost opportunity from advise aided and abetted by ISFN.
There should be a requirement for industry funds to contact everyone of their members personally and discuss their insurance needs. This should be documented in a factfind and followed by an SOA and appropriate file notes. When they identify a need they should offer clients a choice of insurance providers. This would surely be in the client’s best interest so why don’t they do it? If they wont do it why would they insist others do?
Wow, hello, ISNs must have read a documents somewhere and reproduced it because they had no idea earlier. Maybe they just woke up to the fact that advice is more than just their own funds. SMSF advice has always included the above points and MORE where those accredited to do so provide advice. That’s what REAL advisers do every day. A shame a few still are behind the game. It will be interesting to see audit outcomes if ISNs hop into the SMSF arena or will they contract it out to the real world and claim credit. Just another broadside from an inferior mob. ISNs feed members sausages, they have no idea of how a real steak tastes.
Industry funds backing an SMSF crackdown…what a surprise. This newsletter should be renamed ISN lobby group for perpetuating the constant vested interests from industry funds. But guess what, your Labor mates are gone and no one is listening.
What a load of self serving crap. All these points that should be discussed by a SMSF adviser are exactly the things that industry funds neglect to discuss with their members. Having a PDS on a website is not a discussion.
‘SMSF trustees should also be required to undergo regular education to prove they are a fit and proper person to run the fund’
Like trustees of Industry Funds are required???
we want a royal commission on why industry super funds have the lowest insurance coverage for members. Yeah looking after members? Long Live the SMSF.