Fraud and cybersecurity attacks on SMSFs are leading risk areas for trustees, but many of them remain unaware of the possible dangers they face even when using the services of an adviser, an insurance broker has claimed.
Numerisk chief executive Richard Silberman said these areas were identified as key issues that concerned advisers and trustees during the development of his firm’s recently released SMSF trustee insurance product.
“These are the areas we expect to see the most activity because fraud remains a key issue amongst the broader financial services industry and cyber-risk is fast behind it,” Silberman told selfmanagedsuper.
“No one robs banks anymore, not with a shotgun and a hessian bag. They do it from a basement at one in the morning.
“In the first stages of the engagement [on building the insurance product] there was a resounding agreeance from our experience that trustees aren’t aware of the risks and equally there was a very sharp acknowledgement of those same risks by advisers.”
He noted that on the day the firm’s insurance offering was launched, the Australian Securities and Investments Commission (ASIC) issued a media release directed at SMSF trustees that emphasised the importance of being vigilant around cybersecurity.
“There is no better acknowledgement of those risks when the regulator is saying you need to think about these things, and you do, but you have also got to think about how to deal with the exposure when the risk actually becomes an event,” he added.
“ASIC is absolutely required in drawing attention to the importance of being cybersecure. There needs to be a pre-loss mitigation mechanism. What we’re proposing to provide to the market is a post-loss solution.”
While he recommended trustees use the services of specialist SMSF advisers, he reiterated the need for trustees to avoid unnecessary risks and protect themselves where possible.
“The best advice won’t stop you from clicking on a link that inadvertently leads to a problem,” he said.
“The best advice won’t mean the ATO doesn’t bring a random audit on you with a meaningful cost and even the best advice can be misinterpreted or not interpreted at all, resulting in someone making an administrative error that can result in a significant amount of penalty units and hefty fine.”
