financial advice, Legislation, Retirement, SMSF

SMSF advice requirement unnecessary

SMSF Retirement Income Covenant Financial advice advisers

A recent proposal to extend the Retirement Income Covenant provisions to SMSFs is unlikely to adequately meet the current financial advice needs of trustees.

Requiring SMSFs to be bound by the conventions of the Retirement Income Covenant is unnecessary as financial advisers are already in a position to meet the advice needs of trustees and the aims of the covenant, according to an SMSF specialist.

The proposed policy change was put forward in a discussion paper released on Monday by Treasury, which suggested SMSF trustees may not receive an equivalent level of support in the retirement phase as members of Australian Prudential Regulation Authority (APRA)-regulated superannuation funds would through the covenant.

To that end, the paper suggested including SMSFs within the covenant, a proposal that had been previously dismissed in 2021 when the requirement was mandated for trustees of APRA funds.

SMSF Alliance principal David Busoli pointed out the three main objectives of the covenant –maximising retirement income, managing risks to retirement sustainability and ensuring flexible access to savings during retirement – are already provided by financial professionals in the SMSF sector in a much more specialised capacity.

“This is exactly what a financial planner provides and, given the very specific nature of the planner’s focus, on a much more personal basis than an APRA fund trustee,” Busoli said.

Additionally, he suggested mandating the requirement would not eliminate the need for unadvised trustees to seek the services of a financial adviser and expanding an advisory role to accountants would not sufficiently address the diverse advice needs of SMSF trustees.

“Clearly, those SMSF trustees without a financial planner will be unable to increase the knowledge of their members by talking to themselves. The current movement to relax the restrictions on unlicensed accountants to provide basic SMSF advice will not affect this,” he noted.

Instead, he implied the function would be merely relegated to a tick-a-box exercise to satisfy compliance requirements.

“I fear that including a need for SMSF trustees to consider the provisions of the Retirement Income Covenant will only result in the inclusion of meaningless standard templates into SMSF investment strategies,” he stated.

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