SPAA submission to ASIC takes issue on SMSF costs
The SMSF’s Professionals’ Associate of Australia (SPAA) has questioned the cost findings of actuarial firm Rice Warner in its submission to ASIC on Consultation Paper CP 216.
The consultation paper is titled ‘Advice on self-managed superannuation funds: Specific disclosure requirements and SMSF costs’.
In the paper, Rice Warner proposed that financial advisers must “consider and be able to show that they have informed clients of” SMSF cost issues outlined in the table below.
Source: ASIC
The SPAA’s submission outlined its stance on the disclosure of costs associated with the operation of an SMSF.
It said SPAA “was surprised by the report’s findings on when SMSFs are cost-competitive with retail or industry funds.”
“The report showed higher costs than what we understand to be prevalent in the SMSF administration market,” said SMAA chief executive Andrea Slattery.
Slattery added that higher costs led to higher break-even points for SMSF balances to be cost-competitive, which could mislead trustees.
“Because of this we do not think that these calculated break-even points should be used as being indicative of the costs of running an SMSF. The most common cost, such as the median or most common cost, could be used as a more useful guide,” Slattery said.
She emphasised that calculated break-even points ignore the “unique” nature of SMSFs, where costs depend on the SMSF’s investments, the trustee’s level of self-administration, and what type of administration platform they utilise.
“Once again, we believe that this issue on costs can be resolved by trustees having access to advisers with better knowledge and understanding of SMSFs so they can have a meaningful discussion on how having an SMSF will fit their individual circumstances,” she said.