Call to exclude SMSFs from product intervention
Self-managed superannuation funds (SMSFs) represent a unique product that defies being included in any particular “target market” and should therefore be excluded from proposed new financial product design and distribution obligations, according to the SMSF Association.
In a submission to the Senate Economics Legislation Committee review of the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018, the SMSF Association has claimed that applying the legislation to SMSF would be “impractical and onerous”.
“We believe that the obligations may be impractical and onerous as determining a class of potential SMSF trustees would be difficult given that SMSFs can be suitable for individuals in a wide variety of circumstances,” the submission said.
“The decision to establish an SMSF is contingent on a person’s individual traits and circumstances. This makes it difficult to describe a narrow ‘target market’ for which SMSFs are a suitable superannuation vehicle.”
The submission said it was unclear who would create effective ‘target markets’ for a superannuation vehicle, which was distinct to the creation of a ‘target market’ for a financial product which was created by an issuer.
“This is further confused by the fact SMSFs can cater for a wide range of individuals in accumulation phase and retirement phase. It may also be difficult to practically define and separate the wide range of SMSF professionals such as accountants, advisers and administrators as promoters, issuers or distributers,” the SMSF association submission said.
“We believe there are a number of valid reasons as to why an SMSF is established which are both quantitative and qualitative, which will be difficult to evaluate under this legislation,” it said. “We also note that there is already legislation, such as the best interests duty, which governs advice on an interest in an SMSF (which is a financial product). These laws should be adhered to and appropriately enforced to ensure that SMSF establishment advice is being made appropriately.”
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