ASIC deputy chairman Jeremy Cooper has warned planners and accountants about jumping on the self-managed super fund (SMSF) rollercoaster.
Speaking at the SMSF Professionals' Association of Australia national conference in Sydney yesterday, Cooper warned advisers of several serious SMSF pitfalls.
Forgetting to arrange life insurance, poor asset allocation and investment decisions, choosing returns based on past performance and taking a fund of fund approach involving layers of fees were included among the pitfalls.
Cooper also identified SMSFs with a tendency to be overweight cash, failing to comply with the Superannuation Industry Supervision Act and the implications of interfamilial or marital disputes as potential serious risks.
He said the popularity of SMSFs had soared in Australia's sophisticated financial culture.
"Why set up an SMSF? The neighbours have got one. That's a bit flippant, but at the moment there's a sense that there's a bit of a stampede to set up an SMSF. There's a rush to throw $1 million into a fund," he said.
A client's sense of control over their investments, which comes with having an SMSF cheque book, is an important factor in their attractiveness.
Clients must understand the risk of SMSF, have the time and interest in managing one and the discipline to weather times of underperformance, Cooper said.
The regulator warned against financial professionals who advised clients to establish an SMSF when their superannuation savings were insufficient and those who failed to advise a client properly about on-going costs. Things it watches for include 'early access' SMSF frauds.
ASIC has recently clamped down on early release superannuation promoter Sonatane Hafoka. His unlicensed financial services business in Sydney offered clients early access to their super via the Kassongo Superannuation Fund. Hafoka will appear before the Supreme Court of New South Wales on March 26.
"Accountants can only give limited advice on SMSFs. They have to have an Australian financial services licence to advise, deal or provide other financial services in relation to SMSFs," Cooper said.
That ASIC required burdensome and detailed inquiries on super switching was nonsense, he said.
"There's no such thing as best advice ... you just have to provide a reasonable basis for advice," he said.
Another myth Cooper blasted was that single fund switching should not take more than an hour. Super was a very long-term commitment that required great consideration, he said.
