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Vertical integration plagues SMSF admin market

Financial advice is not the only industry sector afflicted by conflicts of interest related to vertically integrated business models, according to dealer group boss Chris Appleyard.

The Custom Wealth Solutions chief executive, who also heads up SMSF admin firm CleverSuper, said some institutions are using ownership of administration tools to restrict the financial product options available to consumers.

“SMSF admin providers have the ability to simply say ‘we cannot support that fund, or that product’,” he told ifa.

“Similar to a master trust or wrap, if the product is not available on the platform then it‘s simply not possible.
[This] is worrying because anyone who chooses to have an SMSF is doing it to have more control over the products it can use.”

Mr Appleyard, who will launch a ‘free SMSF’ offering under the third version of CleverSuper due for release in mid-2014, said the SMSF admin system needs “revolutionsing” and possibly to be brought under the AFSL regime in order to weed out conflicts.

“If it looks and feels like a financial service or product, it likely is,” he said, adding that the $20 billion paid by SMSF trustees to administrators is unnecessary.

“The message needs to get out there [on] prime time television so that people know they don’t have to pay fees anymore,” Mr Appleyard said.

“They can take back control and manage their investments their own way and make all these industry people – advisers, banks, institutions – make them all compete for their business and disclose what they are providing, rather than giving it by default.”

Mr Appleyard licenses his SMSF admin business as an authorised entity under the Custom Wealth Solutions AFSL, which in the absence of an enforced licensing regime, is “just good governance”, he said.