AMP has rejected the Australian Securities and Investments Commission’s (ASIC) proposal for SMSF advisers to disclose when an SMSF may be a cost-effective retirement savings vehicle compared to other superannuation funds.
“We think the publication of points at which an SMSF becomes cost-effective compared with an APRA (Australian Prudential Regulation Authority)-regulated fund serves no meaningful purpose for clients and is likely to mislead clients into thinking an SMSF is less or more expensive than their current fund,” the financial services giant said in its submission to ASIC on Consultation Paper 216 – Advice on SMSFs: Specific disclosure requirements and SMSF costs.
“Break-even points are highly subjective and require a case-by-case assessment of costs in order to be meaningful.
“We think this case-by-case analysis should be carried out by the advice provider as part of their existing advice and disclosure obligations under best interest duty and related obligations in division 2 of part 7.7A of the Corporations Act.”
The proposal to impose this disclosure requirement was based on research performed by Rice Warner on costs across the superannuation industry. However, AMP questioned the appropriateness of basing the recommendation on that research alone.
“The sample size of SMSFs which are represented in the fee tables is unclear in the Rice Warner report,” AMP said.
“There are a large number of firms who provide SMSF administration services and the services they provide, and the way they charge for those services, varies greatly.
“This fragmentation makes it difficult to draw meaningful conclusions about the costs of operating an SMSF, particularly if the sample size is based on a narrow cross section of funds.”
AMP cited recent Australian Taxation Office (ATO) statistics to highlight the difficulty of comparing SMSFs against APRA-regulated funds purely on the basis of cost.
“Previously released ATO statistics on the estimated operating expenses of SMSFs and the pricing structure of AMP’s suite of full-service SMSF administration platforms when compared to the cost of APRA-regulated funds (two members) in the Rice Warner report indicate lower break-even points with APRA-regulated funds than those referred to in the Rice Warner report,” the submission said.
In a statistical analysis included in the submission, AMP demonstrated its full-service SMSF administration platforms were competitive for SMSFs with asset balances of $250,000 and above when compared to the average midpoint cost of APRA-regulated funds in the Rice Warner report.
ASIC had previously stated only SMSFs with asset balances over $500,000 receiving full administration services were cost effective when compared to APRA-regulated super funds.