The rapid growth of the self-managed superannuation fund (SMSF) sector was due to the failure of the advice and funds management communities to present themselves as trusted service providers, according to Portfolio Construction Forum publisher Graham Rich.
“SMSFs started small but have become like a bushfire that is outside of the control of the industry. Their growth is a clarion call about the failure of the advice and funds management community to be regarded as trusted by those now seeking control of their super,” Rich said.
Rich said that as a result of this failure, other groups have become involved in the SMSF sector, including accountants, who have done little to dampen the growth of SMSFs.
“Accountants have been arsonists fuelling the fire and it is in their interests to promote the set-up and growth of SMSFs, as it can make a good paper argument,” Rich said.
Rich said the SMSF sector was a concern within the wider superannuation and retirement savings picture, since many SMSF holders were ill-equipped to manage the underlying assets.
“I do not see increasing financial literacy among the general population, but we have a group of people who expect to invest for 20, 30 or even 40 years better than professional managers,” he said.
“When the Australian superannuation system moved from defined benefit to defined contribution it did not reduce the risks involved. It transferred them to the end user and there needed to be a massive financial literacy campaign around this shift, and that never happened,” Rich said.
“People need to be told that the benefit is dependent on them and the presumption that the benefit will be fine from their defined contributions or pensions is not the case.”
Rich said that with the cessation of the equities market’s good performance, people had become focussed on long-term outcomes as well as investment returns.
