As a year set to be dominated by new advice training standards for financial advisers begins, the SMSF Association has welcomed the Productivity Commission’s call for high advice standards for self-managed superannuation funds (SMSFs) to be enacted.
In its final report of its superannuation inquiry, which was publicly released yesterday, the Commission recommended higher advice standards be required for those giving SMSF-specific advice. This would reject the minimum balance approach previously used for ensuring the sustainability of the SMSF sector, although the Commission did warn that SMSFs with less than $500,000 performed significantly worse on average than regular funds.
This shift reflected long-held recommendations by the SMSF Association, which has pushed to ensure that SMSF advisers are appropriately educated.
“In our opinion, the Commission has got it right in describing a minimum balance requirement for establishing an SMSF as a ‘blunt tool’ that is far less likely to ensure a healthy SMSF sector compared with improving advice standards,” SMSF Association chief executive, John Maroney, said.
“So, we are fully supportive of its recommendation that the Government introduce requirements for specialist training for people providing advice to set up an SMSF.
“Raising the standards of SMSF advice through specific education requirements has long been the mantra of the Association, and a key focus in our mission to lead the professionalism, integrity and sustainability of the $755 billion SMSF sector.”
Maroney also said that the Commission’s above revised figure of $500,000 was “far more realistic to use as a guide of whether it is appropriate to establish an SMSF” than the more frequently cited $1 million.
The Commission also recommended that those advising on setting up SMSFs give prospective SMSF trustees a document outlining the Australian Securities and Investments Commission’s ‘red flags’ before establishment, and extending the current proposed product design and distribution obligations to SMSF establishment.