Addressing an SMSF Professionals’ Association of Australia (SPAA) NSW chapter function last night, Cooper – who led the federal government’s Cooper Review of the superannuation sector – said the SMSF sector needs to ensure the factors that have made it a success are maintained.
“The reason why the self-managed sector works is self-selection,” he said. “SMSFs appeal to people that are generally better off and are used to making money decisions and they are suitable for those people.
“But as you grow the SMSF sector, it will become indistinguishable from the general population – and the minute you have the general population taking control of their own retirement savings, there is a risk that politicians and policymakers just clamp down on the sector.
“So the fear is that too many people want to be in it, and it loses the characteristics that have made it work so far.”
Cooper, a former ASIC commissioner, also singled out the risk of “property-related leverage”, echoing comments made by current ASIC commissioner Peter Kell last week about the regulator’s intention to crack down on dodgy property spruikers in the SMSF space, though he added this is only a “tiny percentage of SMSF activity”.
However, at the same time, the chairman of retirement income at Challenger Limited said he was not a “Chicken Little” on the future of the SMSF sector and pointed out that the sector has survived previous negative rhetoric following the Westpoint and Storm Financial crises.
“Overall, I think the outlook is extremely good; everything is on the up, the regulator is paying attention and the standards of gatekeepers are rising,” he said.
“We are showing the rest of the world that individuals with a good bit of advice really can manage their own retirement savings.”
Will the SMSF sector come to resemble the Small Business Sector where many are willing to have a go but without proper planning and business development processes many fail in the first 5 years. Will we see Joe Average having a go at an SMSF and a portion of them going down in flames?
Is that a reason to impose restrictions or is it just a reflection of the risk in managing money as even the experts get it wrong a lot of the time.
I agree with Mr Cooper that “general population taking control of their own retirement savings” could cause some grief if people with little financial expertise were to commence DIY funds willy nilly without appropriate controls. However at the same time I would be most angry to see unreasonable controls placed on those of us that have a responsible/successful methodology in place for the selection and management of investments In our own case we have been running our own fund since 1995, largely invested in blue chip shares and have acchieved a compound return of 10.59 pa even with the intervention of the GFC.
Real estate by any measure is a lumpy asset. If your SMSF has to invest in real estate and a single property represents more than 20% then the fund has major liquidity issues once either a pension is set up or a death benefit comittment is due within 6 to 12 months. Advisors should not be recommending such assets under most circumstances. ANd that is before you discuss LRBA’s.
i agree with Mr Coooper even though he is a far left communist with his views.
all the mortgage brokers and real estate sales people pushing this leverage through SMSF is the next Storm, Agri Business, Failed Product coming. wait till interest rates rise, and these properties either lose tenants which in most cases really assist the affordabilty of the loans and then the trustees cant afford to contribute.