ASIC challenged on ‘scary’ SMSF factsheet

24 October 2019

The Australian Securities and Investments Commission (ASIC) has been directly challenged on the validity of claims within its Self-Managed Superannuation Funds (SMSF) factsheet, with the chairman of a key Parliamentary committee suggesting it is nowhere near his personal experience.

The chairman of the House of Representatives Economics Committee, Tim Wilson, questioned the data used by ASIC in the SMSF factsheet noting it differed from his personal experience and stating: “…it just looks to me like you guys are trying to scare people out of using SMSFs with that sort of information”.

Wilson directly questioned ASIC’s suggestion that it took 100 hours a year to run an SMSF and that doing so cost $13,900 year.

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He said that the data provided by ASIC was radically different from his own experience and that it seemed disconnected from the practical reality of how people manage their SMSFs.

“But clearly you believe it is accurate,” he said.

Defending the regulator’s position, ASIC Commissioner, Danielle Press, denied ASIC was trying to scare people but described the document as a “a red-flag disclosure report, which is supposed to be raising issues that consumers should be thinking about when going into an SMSF”.

“For some people, SMSFs are absolutely the right outcome and the right option. For others, they're not. We think that the benefits are well-articulated but the risks are not as well articulated. We think that consumers deserve to have those red flags highlighted to them before they make a decision that is very difficult to unwind.”

Press said that the 100 hours “is of course an average”.

“Some people will spend more than that. Some people will spend less,” she said.

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ASIC Commissioner, Danielle Press, is defending the indefensible. Why can't she just admit they made a mistake?

Can someone please remind me and/or one of my fellow honest, hard-working and caring professional advice colleagues(the ones who don’t get the safe, secure stipend funded by the Australian taxpayers),what would happen, if any one of us made published claims such as this (only) one (example) by ASIC , without the appropriate disclosures and declarations and the rest of the choking red-tape that will tortuously kill the ability for Australians to exercise freedom of choice for themselves in all aspects of their lives? I wont even start on the ATO as the source of ‘truth’? Are we really being taken for complete mugs – advisers, accountants and consumers alike?

I usually don't find myself agreeing with Tim Wilson on much at all, but he is correct with his criticisms of ASICs latest SMSF factsheet. Quite frankly, the suggestion that it costs $13,900 and takes 100+ hours per year to mamage a SMSF is utterly ridiculous. In our firm, we have several hundred SMSF clients. The average total administration cost for almost all of these clients is less than $4,000 p.a. and the average time the trustees take per year is probably about 2 hours per year.

Having said that, I would agree with ASIC's implied concern that many people have SMSF's who should not have them. In our business, I personally believe that more than 90% of our SMSF clients are significnatly worse off than they would have been, had they just retained whatever Super fund they had before they commenced their SMSF.

Dear Mark7, Your statement "more than 90% of our SMSF clients are significantly worse off..." seriously concerns me. I really suggest you talk to your compliance person about your statement.

The simple fact is that 90% of our client SMSFs have balances under $500,000. The ATO data shows very clearly that SMSF's with balances under $500,000 have made (on average) less than one third of the return than did APRA regulared funds, between 2014 FY and 2017 FY.

Mark7, what is the average number of hours your firm spends on the administration of these SMSF's ?
ie tax return and audit and discussions ?
Would it be approx 10 hours per year at a charge out rate of $400 per hour ? or is it more like 5 hours p.a , but an account for $4000 ?
Would ASIC be satisfied that the fee charged to the client is commensurate with the work and advice provided ?

So here is a leak from ASIC in regard to their response... "we work in theory land and actually do not understand the day to day workings of the financial planning industry. Just like our submission re grandfathered commissions, we thought that we would make some assumptions as we actually don't really understand the reality!"

Danielle Press, time to go. If an small self licensed adviser wrote this document we would have been prosecuted for misleading a deceptive conduct or driven broke by an ASIC enforceable undertaking. If you wish to enforce an industry you have to face the same consequences you expect of others.

Correction, Academic: Time for ASIC to go.

Just like ASC before them was cleaned out and restructured. It appears Tim Wilson, Andrew Bragg and others are aware of how corrupt and biased ASIC are and hopefully have the intestinal fortitude to oust the rats nest entirely. (to paraphrase ASIC's own sickening catch cry - it's time for heads on sticks!)

I hope so.

Wilson is looking after his mate Geoff and his mates and not the interests of Australians.

Bragg is a newbie MP from the far right and wants to take away the chance of young Australians in having super funds and gaining the benefit of long term compound interest. Bragg seeks to remove the influence of financial planners in setting financial wellbeing for young people.

As I currently see it, young people do not have access to a financial planner in choosing their super as they could not afford the cost to produce the compliance required such as an SOA and even if they could, the cost would be hard to justify under BID. The decision on super for the vast majority is determined by their first contact with employment and thereby determined by bvb the b.v relevant Union.

I believe young people will benefit from the services of a good financial planner - personal financial management is not just superannuation.

I agree that filling out SOAs is tedious and I dont see their value in pushing clients and advisors towards good financial planning and so are a waste of money. SOAs were bought in to force planners to consult with clients while taking their money. So financial planners bought SOAs on their own heads and unfortunately clients are paying this poor behaviour. Good planners also suffer SOAs.
In some ways the real value of a financial planner is to educate young people on how personal investment works and how to get started asap.
Some years ago a woman approached me and I remembered I employed her in her first job. In our catchup discussion, she mentioned that I had 'forced' her into making additional contributions to super and she would not have done that except she thought she needed to do what she was told. She said that I had given her a very nice big nest egg in her super account and thanked me for telling her to do it. This is the bit that Andrew Bragg doesn't get nor want - 'keep the workforce ignorant'.

So your obvious solution (and many others) is to provide unlicenced advice with no consumer protections as it is too costly to provide professional advice some someone that is licenced with the full suite of client protections in place?

Cant see that I was saying what you allege.

For some time now, ASIC have seen themselves playing 2 of the regulator, but also the legislator.
ASIC know they now wield so much power and have so much influence over Govt, they can do anything they like.
It is not the Govt running financial services legislation, it is ASIC.
Unless this is addressed, it will and is resulting in untold damage on so many levels.

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