Financial Planning, Superannuation

Financial confidence a concern

SMSF trustees confidence

New ATO research has indicated a large proportion of SMSF trustees lack the financial confidence needed to run their own retirement savings vehicle.

Independent ATO research conducted recently has shown over one-third of trustees lack the financial confidence and capability to manage their SMSF or put their complete trust in an adviser.

ATO SMSF regulatory branch assistant commissioner Justin Micale acknowledged this finding was of concern, particularly with regard to those individuals in this cohort who were not currently receiving financial advice.

“For those who do not have the benefit of sound advice, this often results in non-compliance, puts their retirement savings at risk and for professionals can also mean they have a more challenging client to support,” Micale told attendees at The Tax Institute Superannuation Intensive event today.

He suggested it was the responsibility of both the regulator and SMSF practitioners to address the issue of raising the confidence and capabilities of trustees for the betterment of the sector.

“It’s really important for us all to ensure prospective trustees enter the system with their eyes wide open with a good understanding of their responsibilities and obligations before signing up to an SMSF,” he said.

To this end, the ATO has released a new publication, called “Starting an SMSF”, to support prospective and new trustees, which is the first in a series of guides the regulator will be providing SMSF owners to assist them throughout the life cycle of their funds.

He also pointed out the need to ensure individuals understood what it means to be an SMSF trustee has to continue beyond fund establishment phase.

“Another interesting revelation from the research is trustees develop habits in the first six months of operating their funds. So there’s a real critical window for early engagement with new trustees during this period,” he noted.

The assistant commissioner also indicated some trustee attitudes toward compliance the study uncovered were cause for additional angst.

“Another finding of concern to us is that the majority of trustees also believe it’s okay to leave their compliance responsibility entirely up to their SMSF professional,” he said.

“I’m certain you’re all aware that while a trustee can appoint a professional to help them, the final responsibility and accountability lies with the trustee.”

According to Micale, this finding again highlighted the critical role SMSF practitioners play within the sector.

“Your positive influence on their compliance behaviour, however, will result in a better experience and outcome for the client,” he noted.

The research conducted by the ATO involved online surveys, shadow shopping exercises with SMSF professionals, in-depth interviews with trustees and professionals, and group discussions.

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