ASIC urges mandating minimum SMSF balance

The Australian Securities and Investments Commission (ASIC) has advocated both prohibiting limited recourse borrowing arrangements (LRBAs) and/or mandating a minimum balance for self-managed superannuation funds (SMSFs) as a means of better protecting consumers.

Answering a question on notice from the Parliamentary Joint Committee on Corporations and Financial Services, ASIC listed what it regarded as possible policy solutions which would help prevent consumers being advised to inappropriately establish an SMSF.

It listed member education, better financial advice, the requirements for setting up an SMSF and better compliance and oversight.

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On the question of requirements for setting up an SMSF it said, “consideration could be given to prohibiting limited recourse borrowing arrangements (LRBAs) and/or mandating a minimum SMSF balance”.

“We note the Council of Financial Regulators is currently considering LRBAs and is due to report to Government by the end of this year,” the ASIC answer said.

It suggested that consideration could also be given to extending the proposed design and distribution obligations regime to the establishment of SMSFs.

“This could involve imposing an obligation on SMSF promotors to consider the type of consumer whose needs would be addressed by establishing the SMSF and the channel best suited to distributing the SMSF as a product class.”

Dealing with financial advice, ASIC suggested that the new training and education standards to be set by the Financial Adviser Standards and Ethics Authority (FASEA) should improve the quality of financial advice provided to Australian consumers.

“ASIC has suggested that it might be appropriate to require specialist training for persons providing advice to set up an SMSF,” it said.

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In theory this is all well & good, but is ASIC happy to also suggest those members receive an exemption from CGT on transferring from other super funds to a SMSF. No, I didnt think so. Would this minimum balance be per member, or per fund?

Hers's some other ways ASIC could prevent consumers being advised to inappropriately establish an SMSF:
- stop turning a blind eye to accountants who inappropriately push their clients into SMSFs to generate more admin and tax work for themselves
- stop the broad based slander and persecution of licensed financial advisers, which is pushing consumers into the arms of those accountants

Agreed, Deano.

Id also add making property a financial product, to stop those recommending a SMSF to flog a property and receive a fat commission from a developer.

I may be wrong but I thought that is why we all had to do the SMSF Specialist course around 2010 to improve the quality of advice in the SMSF space.

The fundamental problem still exists that there are unlicensed people including accountants spruiking and not so much the licensed financial adviser.

The fundamental problem is many people love property and see it is low risk, with lovely big positive returns and monthly income. So they will search out ways to buy property. If ASIC close this option, they will look for a different option. Ultimately they still carry the same risks and problems.

I don’t think it’s such a bad idea. But maybe just a minimum balance you need to have prior to borrowing under an SMSF

So the Royal Comm has shown ASIC to be corrupt, but they are going to dictate to self directed investors how or what they can do? Smacks of socialism.

Meanwhile thier friends in the ISA sector worth trillions in super savings where members are left to the mercy of trustees and sales reps (i.e. union thugs as per RC 2015) are still uninvestigated by ASIC - including Australian Super who is about to lock down their fund from redemptions due to property pricing issues

Really, who would have figured having a building built at 3 times it's real cost and then falsely valued at that cost price not market value, would become a problem down the track?

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