The rise of self-managed super funds is proving popular, but there remain serious and potentially devastating loopholes in the regulatory system, a national accounting firm has warned.
Around 600 self-managed super funds open up each week, but Chan & Naylor is urging investors to tread carefully.
David Hasib, the company’s director of financial planning, said that as a new product, industry scrutiny of SMSFs is to be expected. However, the spotlight has so far remained fixed on the roles and responsibilities of trustees.
He added that little to no attention has been cast over the wider industry, including those developing the products, the many underqualified advisers, or even the growing number of promoters with no qualifications. This is when all share responsibility for creating an environment of risky decision-making.
“Australia’s financial landscape has grown dramatically in its diversity and complexity over the years, yet education requirements for advisers have lagged,” Hasib said.
“It should not be acceptable to play the role of financial adviser in the general sense – the industry is evolving so quickly that it requires specialised advisers that are up to date and add real long-term value to clients.”
Currently anybody can promote SMSFs to potential investors, with rogue advisers failing to alert investors of common pitfalls such as whether the investor has sufficient money for the fund to be beneficial.
According to Hasib, ASIC has acknowledged inadequacies in the current regulatory framework, but urgent action is needed now to ensure trustees are not throwing away life savings because of bad advice.
“A quick internet search will reveal the growing numbers of online spruikers, bearing no relevant qualifications at all, who are cashing in on the new SMSF market,” said Hasib.
“The problem is detrimental to those on the receiving end of uninformed advice, as well as the reputation and integrity of an otherwise healthy industry.”
