Insights

From the Editor

Royal commission shines positive light on SMSFs

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has handed down its final report, with most of the industry breathing a sigh of relief that the recommendations from Kenneth Hayne were not as severe as expected.

Of course, the SMSF sector was not specifically included in the terms of reference, but that didn’t mean some of the anticipated findings wouldn’t have any flow-on effects for it.

One pleasing aspect was the fact the commission did not get sucked in to thinking SMSF advice needed to be specifically examined following the appearances of high-profile financial adviser Sam Henderson and Westpac’s financial planning arm, both of whose testimony involved SMSFs. However, these instances were about poor advice more than anything else and it was comforting to know the constant negative external noise about the space did not play a role in proceedings.

But while the recommendations do not have a specific SMSF bent, again I feel in an indirect way they do represent an endorsement of these types of retirement savings vehicles.

One of the recommendations the royal commission made is to ban the practice of unsolicited selling or hawking of superannuation funds to people who are seeking advice about an unrelated financial issue.

Well if there is one superannuation sector where this practice is not happening, it’s the SMSF sector. In response to that comment, I’m sure some people would ask what about property spruikers. I don’t deny this is a problem, but you can’t say a significant number of the 500,000-plus SMSFs were set up because of property spruikers.

I’m also sure some people would suggest accountants have ‘sold’ people into an SMSF, perhaps also inappropriately. While I’m sure some could mount an argument that this is the case, you wouldn’t be able to say the accountant was incentivised by a bonus or commission in the way bank-aligned advisers have tried to push their own superannuation products on members of the public.

I’m not trying to say the accountant doesn’t have a self-interest angle, but it certainly could not be considered as egregious as their bank adviser counterpart. In fact, potentially a lot of the time the conversation leading to an SMSF establishment would stem from a tax minimisation perspective. This has to be a big tick for the sector.

Hayne’s opinion and potential recommendation regarding the vertically integrated advice model was another much-anticipated thing. Interestingly, he resisted recommending a definite separation between product manufacturing and the provision of advice. That’s not to say he didn’t recognise there was a problem and an irrefutable conflict of interest the model displayed.

I know I’m sounding like a broken record, but I don’t think I’ve been to an SMSF advice presentation or seminar that has not had strategy as its main focus. No suggestions regarding how to encourage clients to invest in particular products, just presentations on how advisers can implement better strategies for their clients, be it around estate planning, contributions or pensions and the like.

It’s one sector where the focus of its advice is not mired in the integrated model and its associated problems.

The sector is not perfect I know, but it sure does exhibit more of the characteristics every review or piece of legislation on financial advice attempts to achieve.

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