The SMSF Association has thrown its support behind the corporate watchdog’s warning to Australian Prudential Regulation Authority (APRA)-regulated funds about potentially misleading statements to new and existing members.
SMSF Association chief executive Andrea Slattery said the ASIC announcement demonstrated those institutions needed to stay between the regulatory goalposts.
“This is a timely warning from the regulator,” Slattery said.
“New members of some funds are being given the impression that they need to roll over existing super to become members.
“It is not only misleading but also deceptive as members may have insured benefits or investment options in other funds that might not be available if they roll over to an APRA fund.”
Investment options might also be more restricted and some investment strategies unavailable, she added.
Her comments come as ASIC deputy chairman Peter Kell provided an overview of compliance issues and reminded APRA super trustees they should be mindful of the financial services laws and ensure any of their communications to new or existing members were not misleading or deceptive.
Further, many APRA funds now provided direct investment options with high concentrations in particular investment classes, which brought into question the lack of diversification in members’ investment portfolios, she said.
“This is something SMSFs are continually criticised for failing to have and is a fallacy with the vast majority of SMSFs,” she said.
“What’s interesting is that these direct investment options are being likened to an SMSF – an erroneous and misleading comparison.
“SMSF is a defined term in the law and no one is able to mislead consumers into thinking they are getting something similar in another option.
“The fact that these direct investment options in the APRA funds typically don’t have the range of investment choice or the flexibility of an SMSF – a duck is not a chicken and an APRA fund is not an SMSF no matter how dressed up it is; it is either an SMSF or not.”
She said anecdotal evidence suggested the take up of those direct investment options was slow, which was hardly a surprising outcome when performance was shown to be below the same funds’ standard investment options and fees could significantly erode balances.
In order to ensure their rights and entitlements in their current funds were not reduced or eliminated when deciding to move funds, it was essential for Australians to get advice from a qualified SMSF professional or adviser, she said.
“They should also consider a number of options to ensure they move to the fund that suits them best, not just the first one they come to or the one with the best advertising campaign,” she warned.
Meanwhile, the SMSF Association today said having the portfolio of assistant treasurer in cabinet and combining it with small business was a very positive development for the SMSF sector.
“There is a natural symbiosis between small business and SMSFs, and for someone of the calibre of Kelly O’Dwyer to be appointed to both portfolios is a sign this new government is placing the right emphasis on these critically important areas for the economy,” Slattery said.
“We are optimistic that Kelly, in partnership with the new Treasurer, Scott Morrison, and the reappointed Finance Minister Mathias Cormann, can provide the leadership that will see a concerted response to the current and future reform agendas.”
