Financial Planning, Superannuation

Research won’t lift SMSF recommendations

cost research SMSF recommendations

Advisers will not be able to automatically recommend an SMSF for a client with a superannuation balance of $500,000 or above based on new research indicating these types of funds would be the most cost-effective for them.

New running cost research indicating an SMSF with a balance above $500,000 was the most cost-effective retirement savings vehicle will not lead to an increase in adviser recommendations for the establishment of these types of funds from the viewpoint of the best interest duty, a sector strategist has said.

“Unfortunately from an adviser’s perspective … we can’t start with SMSFs [for individuals with a super balance of $500,000 or above] because it’s the cheapest option based on the research,” BT Financial Group SMSF strategy national manager Neil Sparks said during a recent SMSF Association-facilitated panel discussion.

“I would love it to be the other way, but we have to go back to the best interest duty and with the best interest duty one of the first safe harbour steps is to consider if making a product recommendation is necessary.

“We’ve got to first start with the best interest duty [regarding] what [superannuation fund the client is] in now and [then] determine should we recommend a product going forward.

“If the answer is it makes sense to make a financial product recommendation, such as an SMSF, then we have to do more research, more digging, to assess all of the available information, ask more questions if it’s necessary, and then assess all of that to determine if the alternative product will deliver a better outcome than the incumbent product.”

Fellow panellist Smarter SMSF chief executive Aaron Dunn noted while it would not  lead to automatic SMSF establishment recommendations, the research should have the effect of giving the regulator a more positive attitude toward the sector.

Dunn illustrated the point using a traffic light analogy suggesting the Australian Securities and Investments Commission attitude could now allow advisers to “start at amber”, rather than with a red light, and progress to a green light if the circumstances indicate an SMSF is the right solution for an individual.

SuperConcepts SMSF technical and strategic solutions executive manager Philip La Greca agreed the research would lead to an attitudinal shift that will allow SMSFs to be considered as a viable retirement savings vehicle choice without having to dispel a significant number of negating hurdles first.

The findings from research conducted by Rice Warner, commissioned by the SMSF Association and supported by SuperConcepts, was released last Monday as part of SMSF week.

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