The Financial Advice Association Australia (FAAA) has questioned the thinking of the federal government in considering the inclusion of SMSFs under the Retirement Income Covenant (RIC), noting fund trustees are highly engaged and many use financial advisers or can afford to access advice.
In its submission to Treasury’s consultation on the retirement phase of superannuation, the FAAA called for more advice and information to be provided to retirees ahead of changes to or the addition of retirement income products.
The submission noted that in this regard, SMSFs were already well serviced and capable of accessing advice when needed.
“While we note the differences in the regulatory regime that applies to SMSF clients, such clients are much more likely to have access to financial advice,” the FAAA stated.
“In addition, the SMSF model is very different to that of retail and industry superannuation funds, in terms of the responsibilities of trustees, who are also members.
“Thus, while they may not have a requirement to comply with the RIC, they are likely to have a higher level of knowledge and/or access to a financial adviser who can address their advice needs and help ensure their financial future is rosy.”
The FAAA pushed back further on the suggestion SMSFs should be included under the RIC in its response to a question in the consultation paper, which asked what SMSF trustees needed to do to manage risk and maximise their retirement income, what barriers prevented them from doing so and what role government or industry could play to improve these outcomes.
“We would caution the thinking behind this question,” it stated.
“SMSFs are closely held products, where the trustees are also members and there is often an adviser involved.
“SMSF members, on average, have much higher account balances than APRA (Australian Prudential Regulation Authority) funds and thus are much better positioned to access and afford financial advice.
“Often the adviser is providing advice to both the fund and the members, both as members of the fund, but also more broadly. Thus, they have a knowledge of the client’s full financial position and are well placed to address risk, access to savings and maximising income.
“We do not believe that at present it makes sense to extend the Retirement Income Covenant obligations to SMSFs.”
