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Industry must combat SMSF critics

The SMSF industry needed to “fly the flag” for the sector and defend itself against the common criticisms it has received over the years, a technical specialist has said.

The sector has been slammed and lambasted with unfounded claims due to its size and fast growth rate yet SMSF practitioners were allowing this to happen, AMP SMSF head of policy and technical Peter Burgess said.

“As a sector, we’ve become very good at turning a deaf ear on that criticism,” Burgess told delegates at the 2015 SMSF Association National Conference in Melbourne today.

“But while we may be willing to always ignore this criticism the policy makers, Treasury and the government may not be as willing to turn a deaf ear to that.

“So I think it’s important that we are all able to appropriately defend this sector, when we’re called on to do so by our clients and the wider community.”

Burgess used the example of SMSFs engaging in poor and risky investment behaviours, as they were not prudentially supervised like Australian Prudential Regulation Authority (APRA)-regulated funds.

“We are quite right to push back on claims that SMSFs should be subject to prudential supervision – it flies in the face of what SMSFs are all about,” he said.

“But of course in the absence of prudential supervision the critics will continue to argue that the decisions made by SMSF trustees are not subject to the same checks and balances as the APRA funds, and because of that, there’s a higher risk of poor investment decisions being made [or] that the asset allocation of SMSFs is not ideal for long-term returns.”

However, there were plenty of holes in that argument, Burgess said.

“I don’t think the critics have sufficiently made their case for the poor investment behaviours,” he said.

“While SMSFs are not subject to prudential supervision – and nor should they be – let’s make sure that the rules that are there support and drive the right investment behaviours and outcomes for SMSFs.”

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