The superannuation industry is playing hardball in an attempt to protect its shrinking market share from the growth of self-managed funds. Industry associations have asked for do-it-yourself (DIY) super fund trustees to be licensed and for DIY funds to have minimum account balances. They want the Government to do something to stop independent-minded Australians from taking responsibility for their own retirement savings.
The three groups making the loudest noise are the Association of Superannuation Funds of Australia (ASFA), the Australian Institute of Superannuation Trustees (AIST) and, surprisingly, the Financial Planning Association of Australia (FPA). It’s surprising because many of the FPA’s members advise clients to set up DIY super funds, which they help manage for a fee. Now the FPA is pushing for those same clients to meet mandatory education requirements!
If the FPA believes that clients are not informed enough to be DIY trustees, should its members be recommending it? Meanwhile, ASFA purports to be the “only peak body that can truly claim to represent all sectors of our industry and its service providers” (obviously not DIY fund trustees). Licensing is overkill. Trish Power, the superannuation editor of Eureka Report , says it’s like asking car drivers to be licensed as semi-trailer drivers. You want them to be able to drive but they don’t need to be able to handle heavy vehicles. Besides the misinformation being put about by the super industry, the big problem with the blitz on DIY super funds is that no-one is representing the DIY fund sector itself.
The Self Managed Superannuation Members Association (SMSMA) believes that if there is to be a review of standards, it should be directed at the advisers and service providers looking after DIY super funds. Are the advisers, accountants, auditors and administrators up to the job? The Self Managed Superannuation Professionals Association of Australia (SPAA), which represents service providers within the DIY super fund sector, shares the view that higher educational standards should be applied to service providers. Note that SPAA runs a DIY super fund specialist course, which I assume it would put forward as the industry standard.
Power says the campaign against DIY super funds orchestrated by the larger super industry – both retail and not-for-profit super funds – has been a sad, disappointing display from a sector that seems to have forgotten that the super industry only exists because of fund members. The most important question is, or at least should be: what serves the best financial interests of the individual? But of course the reason the industry is so upset is that the DIY funds represent the juiciest accounts.
The 719,000 DIY fund members represent 7 per cent of super fund members but a quarter of the money (or $300 billion). At June 30, 2007, the average DIY fund balance was $800,651. Five years ago, DIY super funds held only 20 per cent of all superannuation money, and 10 years ago it was just over 10 per cent. The bottom line is that the DIY super market share is growing, and will continue to grow. The super industry has made wellmeaning and subtle attempts to discourage fund members from moving their savings into DIY super funds. And for a large minority of DIY trustees, the DIY fund may not be the best vehicle. Further, it has been claimed by one industry observer that about 50,000 of the 370,000-plus DIY super funds – 15 per cent – have been set up to gain early access to super money illegally. But for the overwhelming majority of DIY trustees it serves them well.
Studies have shown the main driver for setting up a DIY fund is taking control, and the large funds have only recently understood what this means. The large funds have been complacent for a long time. They are losing the market share battle because they are simply not meeting the needs of the 700,000-plus members of DIY funds. Lobbying against the DIY funds is not the way to respond. {mos_fb_discuss:20}
