Advisers need to address 'unacceptable' SMSF fees

Inefficiencies and additional cost layers imposed on SMSFs are “unnecessary and unacceptable”, a financial services technology provider has said, calling for advisers to address the issue of the double dipping of fees.

In a statement yesterday, managed discretionary account technology provider MA Operator said unnecessary additional SMSF services include: an unnecessary layer of administration for SMSFs;  the ‘unbundling’ of wrap assets at tax time based on wrap providers’ reporting; and ongoing administration for assets where only beneficial ownership is provided.

“According to data from the ATO, the average operating expense ratio for SMSFs increased to 1.06 per cent for the year ended 30 June 2014,” the firm said.

“For a fund with the average fund balance of $1,066,080 (recorded in the ATO report) the average operating expenses would work out to be $11,300. The good news is that many of these expenses can be reduced or avoided.

“Take first the layer of administration SMSFs may be paying for unnecessarily. The platforms and wraps offer the convenience of consolidated investment and tax reporting. However, this can carry high management fees depending on the funds under management.

“Also, most SMSFs pay their accountants to administer all the SMSF assets, including those such as investment property held outside wraps and platforms. They therefore effectively pay twice for the administration of assets represented on platform.”

According to MA Operator, it is not just fees that are an issue but other additional costs and administration inefficiencies.

MA Operator co-founder Shannon Bernasconi said, “The inefficiencies and additional cost layers imposed on SMSFs are frankly unnecessary and unacceptable."

Ms Bernasconi said, fortunately, the rise of fintech presents an opportunity for advisers to provide SMSF and high net worth clients with an alternative that can reduce or avoid these unnecessary fees and improve efficiency both for the client and the adviser.

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