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Popularity of SAFs to rise

A financial services consultant has predicted the use of small Australian Prudential Regulation Authority (APRA) funds (SAF) will increase in the coming year due to a rise in the costs of running an SMSF.

JWW Consulting founder John Wiseman pointed out one of the factors leading to higher SMSF running costs was the end of the “do-it-yourself” amateur era of fund management, meaning trustees would be looking for greater assistance in the management of their funds.

“Far too many investors in the past were attracted to SMSFs by low or no fees,” Wiseman said.

“This has now come to an end with unstructured unqualified advice in the new era resulting in the severest of penalties.”

According to Wiseman, the new environment might encourage trustees to consider winding up their SMSFs and seek a more viable alternative.

“A SAF may well be the ideal solution for those considering getting out of their SMSF but who feel they can’t because of tax implications of moving funds and investments,” he said.

As such, he recommended financial planners who had not explored the opportunity of having their clients roll their SMSF assets over into a SAF to do so now.

“Planners that have not considered SAFs in the past and failed to mention or recommend them in SOAs as alternative strategies for clients will do so at their peril in the future,” he said.

“This change will benefit clients and the industry and planners would be well advised to familiarise themselves with SAFs as a matter of urgency.”

He added he anticipated an increase in the legal costs of a large number of SMSFs as trustees looked to review trust deeds post-July 2016 in light of the raft of changes about to be imposed on the superannuation sector.

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